Issues in Management Commodities

Issues in Management Commodities

( students are required to write 1 page or 2 on each topic “1A, 1B, 1C, 2A, 2B..etc”)

1. Commodities markets instability and price volatility

1. The role of fundamentals(supply and demand) in commodity price formation; how low short term price elasticities of demand and supply affectvolatility of prices; the role of stocks of storable commodities and spare capacities in making supply and demand more elastic to price signals, and the related concept of buffer stocks.

1. The impact of non-fundamentalson the instability of commodity markets and volatility of prices: excessive speculation; natural events;geopolitical factors.

1. The importance of adequate transparency in the markets and statistical data &reporting on commodities production, consumption and stocks, and its impact on price discovery and better performance of markets.

2. Commodity futures markets

1. The role of derivatives in commodity price risk management; commodity exchanges and over the counter (OTC) markets; main participants in commodity exchanges;contango and backwardation.

1. Main instruments of futures markets: forwards, futures, swaps and options.

1. Financialization of commodity futures markets and Dodd Franck as an example of a new regulatory framework improvingon reporting and transparencyrequirements, and surveillance of major players and their position limits.

3. Trade measures and commodities

1. Tariff and non-tariff (quantitative and non-quantitative) barriers used by importers; consumption indirect/excise taxes in developed countries as de facto tariffs; subsidies to meet the basic needs of population in food and energy.

1. Export taxes and quantitative measures imposed by exporters; subsidies to support producers and exporters.

1. Discussions on agricultural subsidies,cotton and raw materials in WTO.

4. Commodities and development

1. Problems of commodity dependence including resource curse and Dutch disease;

1. Importance of diversification of economy,including modernization of commodity sector, value addition and moving up the ladders of commodity supply chain, encouraging investment including FDI, and development of new sectors of the economy.

1. The sustainability and climate change aspects of the commodity economy, including importance of limiting CO2 emissions, and other adverse environmental impacts of production, trade, distribution and use of commodities.

5. Commodity trade transactions, payments and finance

1. International sales contracts and delivery terms:duties of buyers and sellers;Incoterms.

1. Payment terms of international trade transactions: open account and related credit insurance, factoring & forfaiting, and receivables securitization; documentary collection, and documentary credit /letter of credit; guarantees, bonds and standby letter of credit.

1. The nature of structured commodity trade finance (SCTF), the examples of pre-export commodity finance (PXF) and warehouse receipt financing.

6. Commodity Markets*

1. Natural Gas
2. Crude Oil
3. Copper
4. Coffee
5. Grains

* One page commodity market description should include short description of the nature and uses of commodity, global supply of and demand for (production and consumption) of commodity, main producers/exporters and consumers/importers, international price regime and price developments and explanations of those developments (highest and lowest price in XXI century, super cycle of 2000s, crisis of 2008, recent decrease due to increase in supply and stagnant demand etc)