6 tips on how to follow the commodities market

Those operating in the commodities market must constantly monitor the variables that affect the prices of their products and services. The aim is to keep up with global trends in order to make decisions based on concrete data.

In this article, we present 6 tips for implementing this practice, as well as reliable sources for official market reports. Have a good read!

Tip 1: Follow the macroeconomy and global geopolitics

These are two of the main factors that influence commodity prices. Monetary policies in producing, importing and exporting countries can change currency values and, consequently, generate a global chain effect. In addition, political conflicts can also impact traditional commodity delivery routes, freight rates and more.

See the ideal sources to follow the global market and its movements:

1 – International Monetary Fund

Global economic news and financial indicators.

2 – Bank for International Settlements (BIS)

It provides information on bilateral agreements between countries, data on the financial stability of different nations, as well as news on monetary policies with a focus on central banks and financial markets.

Read also:

• Fiscal policies and the foreign exchange market: understanding their impacts and influences

Tip 2: Monitor the weather in producing countries

The weather also has a major influence on the commodities market because it can affect the yield and quality of world crops. In the event of droughts or floods, for example, the global stock of a product can be affected, altering its supply and prices at an international level.

See where to monitor the weather forecasts:

1 – NOAA (National Oceanic and Atmospheric Administration)

International reports on the world’s major weather events, such as La Niña. Here you can find reports, weather forecasts and possible impacts on agriculture.

2 – World Meteorological Organization (WMO)

Platform that provides medium and long-term climate data and information.

3 – Climate reports on Hedgepoint

Hedgepoint releases weekly weather reports. Simply sign up for the Hedgepoint HUB and access the following short-term weather reports:

• Climate Prognosis – Central America and Colombia;
• Climate Prognosis – Vietnam;
• Climate Prognosis – Brazil.

Tip 3 – Keep track of supply and demand data for your product

The supply and demand of products are the main influencers of values in the commodities market. Data on production, global stocks and world consumption can help predict possible price fluctuations.

In cases of low demand, for example, the value of a product tends to fall. By knowing this, you can anticipate possible market reactions and adapt your current strategies. Below are some examples of reliable government sources for finding this data:

1 – US Department of Agriculture

It regularly publishes data on the supply and demand of agricultural products worldwide, as well as information on the progress of harvests, stocks, yield forecasts and more.

2 – US Energy Information Administration

A source that provides data on specific energy commodities. The site also publishes information on the world’s main producers.

3 – World Bank Commodities

It provides data and analysis on global commodities, including information on trends, prices and other factors.

4 – Food and Agriculture Organization of the United States

Data more focused on agricultural commodities. You can access information on the largest producers, crop history, export and import content and more.

Tip 4 – Follow commodity indices

Commodity indices are general indicators of the price of a product, quantifying its performance on the market. They are used to compare the values of different commodities and understand which ones are more liquid.

You can analyze this data in different types of indices: some are more focused on a basket of commodities and others have a broader portfolio. There, you can follow the current values of cotton, for example, its history of increase or decrease and other information.

See where to go:

1 – Bloomberg Commodity Index

Commodity index with a wide range of products. It is one of the largest and best known in the world.

2 – S&P GSCI (Goldman Sachs Commodity Index)

One of the most widely followed indices in the world. It works with the performance of various commodities.

Note: within these indices you can filter specific information on a range of commodities, such as agriculture.

Read also:

• Understand what commodity indices are and how they work

Tip 5 – Monitor futures exchanges

In addition to indices, it’s also important to monitor commodity exchanges and futures contracts: where commodities are traded. These contracts are agreements to buy and sell a product at a pre-established price, with delivery scheduled for the future.

Following these quotes can provide insights into market expectations for commodity values in the short and long term. The main commodities exchanges and futures contracts are:

1 – Chicago Board of Trade (CBOT)

One of the oldest handbags in the United States and used worldwide.

2 – Commodities and Futures Exchange (BM&F)

Located in Brazil, it trades futures contracts and other financial instruments.

Tip 6 – Follow up-to-date market reports

Data is the best indicator for those who work with commodities. Access platforms focused on this market to find detailed reports and analyses on price trends, which products are rising or falling in value and other information.

This data helps to understand historical patterns and predict possible variations in the commodities market. See below for where to find these materials:

1 – Hedgepoint HUB

Hedgepoint has a portal that regularly publishes updates and reports on the main products in the agricultural, energy, economic and other commodities markets. After registering, access to the documents is free.

Read also:

• Volatility in the commodities market: outlook for 2024

Hedgepoint price risk management for a world in transition

Those who work with commodities are exposed to the volatility of this sector and the possible financial risks intrinsic to it. For this reason, a large part of the market uses hedging tools to protect itself from price fluctuations.

At Hedgepoint, you have more than 450 hedging products to meet your price protection needs. Contact our team and speak to an expert to find out more.