Coagro Corp: Buying or Selling: the Characteristics of each Commodity Market

They have fundamentally divided into two: the buying and the selling categories.

Commodity markets are huge. They take a good part of the international commerce, and will, without doubt, remain as one of the most important commercial activities in the world. It helps the producers and the manufacturing industries and generates billions of dollars in transactional value on a daily basis. From small nations to huge companies, all benefit from the buying-selling process in the commodity market. But what are the characteristics for each one of these processes? That’s what we’ll be talking about today.

Both, buying and selling processes, are done by commercial entities or personal representatives. For many, the alliance with a particular commodity firm or broker entails a legal backup and responsibility. For producers, they are their allies and representatives in the market, and for manufacturers, they are the providers for their business. But how are they differentiated?

Buying commodities

Industries and service providers require raw materials to work, and commodities brokers are the source and the responsible entities to get them. They interact directly with the providers, giving them opportunities to establish long-lasting trading alliances and be participants in the prices and trading conditions adjustments for their potential customers.

However, buying commodities does not only implies acquiring the product and then selling it. There are several ways in which a company can benefit from being a commodity buyer, and this is one of the principal characteristics that differentiate this market. The buyers in the commodity market can do two things: buy directly from the product’s sources, or buy from third parties. These two generate different profit margins, as well as distinct commercial responsibilities. The profit margins are bigger for those that cut down the middle man and go straight to the source, as a big portion of that profit can go to the third party that you use to buy your products.

Selling commodities

The selling process for commodities is entirely different. Commodities contracts generally work with products that haven't gone through any previous manufacturing process. As these are destined for industrial purposes, the transportation and selling are handled in significant amounts: tonnes, containers, and bulks, for example. It’s also implied in the process that the third parties involved (aside from the provider) agree on the prices and the transportation methods. Often, the selling party has the responsibility to transport the product to its final destination.

The work of commodity brokers and firms is deeply involved in the achievement of the desired result: happy customers. These clients are often companies that also need these products on an ongoing basis, making the selling process a constant. For that reason, commodity brokers in charge of selling goods often come to agreements with the producers to establish a continuous flow of the product to satisfy future buyers demand.

They are also in charge of setting up prices for their buyers. Commodities markets are volatile, and most of them have constantly slight variations as a result of several factors: the date of the year, possible damage to the production, incorporation of another industrial entity, the general demand and offer, and so on.

As you can see, both buying and selling processes on the commodities market vary slightly from one to another. It’s important that you acknowledge that you need professional aid to obtain the best possible results in the commodity industry. Coagro Corp is a company with over 20 years of experience in the market, which offers their customers the best profit margin. From consulting to actual business operations, they know how to handle the ups and downs and make selling and buying processes a great opportunity for you!