The market is a rather large-scale concept. So, there is a currency, investment, financial market. But still the most popular in the entire range today remains commodity. We will analyze this market in detail in this article. We will give its definition, consider the structure, get acquainted with the most important performance indicators, and classify such markets.
Definition
Commodity market is an area of commodity exchange. A more common definition: economic activity, a system of economic relations, organizational ties aimed at promoting products from the manufacturer to the final buyer.
The commodity market is a sphere of commodity exchange, which is necessarily distinguished by a relationship in the form of the sale of products. This is also the name of the location of economic activity, where exactly the goods are sold.
Composition elements
Commodity market is a combination of three main elements: the demand of the population, product prices and commodity supply. Let's characterize them separately.
Demand is the totalsolvent needs of citizens of the state. This element will completely determine the needs of consumers in conjunction with the monetary value that they are able to give for the goods.
Price is a specific monetary expression of the value of products on the market. In this case, the cost will differ from the price for a number of factors:
- The value of money. It will be directly affected by the value of gold, through which the value of goods is ultimately expressed.
- The amount of money in circulation that does not match the amount of gold that replaces it.
- Custom value and product quality. It is consumer properties that will determine the price ratio between certain goods, their varieties and types.
- The conditions for the sale of products directly depend on fluctuations in supply and demand, affecting market changes in prices.
Product offer will be determined by mass products sent by the manufacturer for sale. Three main sources stand out here - these are import purchases, mass production of domestic goods and stocks of products in warehouses.
Factors affecting price
Having analyzed the concept of a commodity market, let's take a closer look at its largest element - the price. This is a value that is formed by a number of factors. Economists break them down into two orders.
First order factors:
- The state of the monetary sphere. This refers to the exchange rate, as well as the purchasing power of themoney.
- Price regulation. Both state and monopoly regulation.
- The ratio of supply and demand in the commodity market.
- Price of production. The value is affected by both profits and production costs.
The second order factors are:
- Established relationship between the consumer and the supplier of the goods.
- Payment terms.
- Price franking.
- Product quality.
- Supply volumes.
Key performance indicators
The activity of the commodity market will be determined by a set of several indicators. Among the most important are the following:
- Commodity market capacity. This refers to the maximum volumes of sales of certain products in specific conditions - with a certain solvency of demand, product offer and retail prices.
- Dynamics of commodity market development. Tracked across multiple industries. Connecting, they form a single commodity market of the state.
- The degree of market diversification. This is the degree of coverage by a particular type of product of the ethnic, solvent, geographical ability of citizens of the state.
- The quality of the goods sold. The parameter will be determined by a combination of product properties. When analyzing the product market, it becomes clear that buyers place increased demands on the following indicators: the safety of both packaging and consumption of this product, compliance with environmental standards, compliance with labeling,providing after-sales service.
- Product competitiveness. This refers to the ability of a particular product to meet the requirements that are relevant on the market at a certain period of time.
Geographic classification
This is a classification based on the geographical location of the subjects of the commodity market. Separate markets of regions are distinguished, which are combined into systems of individual states or their groupings according to the same geographical principle. Commodity aspects will not be relevant here.
Thus, the global commodity market includes the following categories:
- Latin American markets.
- African markets.
- Oceanian and Australian markets.
- Western European markets.
- Asian markets.
- Markets in Russia and Eastern Europe.
- North American Markets.
- Markets in the Middle East.
Classification by commodity-industry characteristics
One more classification of subjects of the commodity market is also common. This is a division by product-industry basis:
- Finished products. These are markets for equipment and machinery, industrial and household products, and other finished products.
- Semi-finished products and raw materials. The category includes markets for industrial raw materials, fuels, forestry and agricultural products.
- Services. Three main sub-categories again: markets for transport services, scientific inventions, other services.
These are far from final categories and subcategories. Inside myselfthey will be divided into smaller ones. So, the market for industrial raw materials is the following markets:
- steel;
- platinum;
- steel pipe;
- nickel;
- medication:
- diamonds;
- precious metals and more.
For example, we can consider the fuel market. Within itself, it will be divided into smaller markets. The most significant of them is oil and oil products. This is the so-called "joint" category of goods. The fact is that products from this category are obtained only by the production of other types of goods.
Monopolization restriction
Restrictions of commodity markets are determined by a set of conditions that determine the features of their functioning. The degree of monopolization of the market plays an important role here. The following varieties are distinguished in this field:
- Monopoly. There is one seller and an unlimited number of consumers on the market.
- Monopsony. There is an unlimited number of distributors for a single buyer.
- Oligopsony. The market has a limited number of sellers and an unlimited number of buyers.
- Polypoly, polypsony. Market conditions that bring it closer to perfect unrestricted competition.
Types of monopoly market
So, the boundaries of the commodity market are primarily set by the monopoly. Its most important factor in this case is the actual concentration of product supply. There is a commodity marketcan be presented in three varieties:
- Monopolistic. The market will effectively be dominated by a single supplier.
- Oligopolistic. The market is actually represented by a small group of large sellers.
- Atomistic. It is determined by the low concentration of offers of specific products, which leads to intense competition in the market.
It should be noted that this is a rather abstract classification. In the real market, there are several functional forms of both monopolization itself and competition.
Relationships between sellers and consumers
The conditions of the market can be more accurately divided on the basis of differences in the relationship between its two main participants - sellers and buyers. It also allows you to determine the features of monopolization, state regulation of a particular market segment, methods and forms of product offering.
Hence the commodity market is usually divided into two sectors:
- Open. These are short-term transactions, wholesale internal trade, free market. The latter is further divided into the spot market, exchange trading and the black market.
- Closed. This sector includes commercial long-term, intercompany and sub-delivery, as well as special and counter trade.
Let's present a more detailed description of the sectors of the commodity market.
Closedsector
The closed sector is the part of the market where counterparties will interact through relationships that are not purely commercial.
Let's imagine the main segments of the closed sector of the commodity market:
- Intra-company deliveries. This includes the turnover between head offices and subsidiaries, branches of one large-scale corporation.
- Sub-supplies of independent medium and small companies. They act here as contractors of larger monopolies within the framework of specialization and cooperation.
- Special trade, which is the supply of products under aid programs, special intergovernmental agreements.
- Countertrade involving export related transactions.
Open Sector
The open sector of the commodity market, logically, seems to be the opposite of the one presented above. This is the name of a set of market segments that are interconnected by relationships that are only commercial in nature.
What is a commodity open market? These segments are:
- Short-term deals. These operations are distinguished from others by their urgency. As a rule, they are concluded for a limited period - up to 1-1.5 years.
- From retail to wholesale.
- Operations on the free market. This concept refers to such a trading market where there are no restrictions for free competition. At the same time, this phenomenon cannot be called purely positive. After all, the free market is not only spot and exchangetrade, but also all those illegal, criminal schemes of sale and purchase that are united by one concept - the "black market".
Separately, long-term commercial transactions should be mentioned. They cannot be attributed to either closed or open sectors of the trading market. Rather, they occupy an intermediate position in this classification. This is a form of commodity exchange, which, first of all, is characterized by long-term commercial relations - from 2 to 25 years. Long-term commercial transactions determine the forms of economic preferential relations. Trade here is conducted only on the basis of commercial contracts, involving long-term cooperation between the seller and the buyer.
The commodity market, even if it is a kind of market in general, is a rather large-format category. This is shown both by its classification and analysis of the structure. The commodity market is divided into closed and open sectors. It is graded according to geographical, commodity and industry characteristics. The classification according to the level of monopolization will also tell a lot about it. Most importantly, it is this market that acts as a field for commodity exchange. Which is embodied purely in the implementation of various contracts for the sale of services, raw materials, finished products, scientific inventions, machines, etc.
