Question submitted by Muralidharan - 13, Sep 2014

Commodities market question

When you trade in a market, I have read they are made up mainly of fund managers and banks
etc but lets take for example the wheat or rice commodities market. Do companies and people
who aren't speculating (price) operate in this very same market?

Harish - answered the above question

  • Harish (13, Sep 2014):
    Question here is who are the participants in commodity markets. We have people who are in commodity market for reasons like hedging, arbitrage, speculation which in turn includes scalping, day trading and position trading. 
    Yes, people who are not speculating are also part of commodity market and they basically use for hedging. 
    All types of participants are required for the healthy commodity market. Speculators provide liquidity to the market. Arbitrage ensures that the price difference between market for the same commodity is not much.