Table of Contents

  • In June 1979 the Commonwealth Secretariat arranged a Seminar for Commonwealth officials to promote understanding of the operations of the London Commodity Markets and the significance of their price-fixing role for commodities on the exports of which many Commonwealth countries depend. As a follow-up to that Seminar and taking into account heightened activities in commodity markets, arising from continuing high levels of inflation, exchange rate instability and increasing interest in investment in commodity markets, the Secretariat's Economic Affairs Division commissioned this Study from the Commodities Research Unit to examine more closely recent developments in commodity marketing.

  • Over the past decade the prices of commodities traded on the world market have fluctuated considerably. The spectacular boom in commodity prices after 1972 was following by a steep decline by 1975. Since then, against a background of speculative activity, uncertain prospects for industrial growth, and political upheavals in producing countries, instability has continued.

  • In this chapter we shall present market profiles of several commodities to illustrate the scope and extent of the growth of terminal market trading. The commodities dealt with, both metals and agricultural (or ‘soft’ commodities), are a diverse group with different market characteristics, offering a wide range of examples of trends in the international marketing of commodities. For convenience of comparison, as far as possible we have covered the same time period for each commodity – from the early ‘sixties’ up to the present.

  • Chapter II illustrated how the volume of trading on terminal markets has increased over the past decade for a wide range of commodities. To understand why terminal market trading has grown in importance, we shall now examine how producers and consumers of commodities can make use of terminal markets, and what advantages they offer. In the next chapter, we shall study the reasons behind the expansion of non-trade interest in terminal markets.

  • The growth of commodity futures trading over the past twenty years has been explosive. In 1960, 3,878,151 contracts were traded on U.S. Exchanges. By 1977, the number of contracts traded had reached 42,880,318, an increase of over 1,000 per cent.

  • The preceding chapters of this study indicate that it is no straightforward matter to assess the influence of terminal markets on the price stability of commodities. As long as terminal markets reflect the true balance of supply and demand in the physical market (together with implied judgements of the future balance), then a shift in the real market will elicit a response from the quotations on the terminal market.

  • In this final chapter, we shall pull together the various strands of analysis presented in the course of this study, and examine the more significant developments affecting commodity marketing in recent years. First, we shall summarise the empirical evidence concerning the changes that have occurred in the level of terminal market trading and in commodity price volatility in recent years. Then, we shall analyse the sources of the growing trading activity on futures markets.