Commodities touch a huge cross-section of investors, including farmers, exporters, importers, manufacturers, and governments over the past few years. Given the numerous risks that companies face in this well-knit, globalized world; they have begun to increasingly comprehend the importance of hedging. So much so that risk management through commodity and currency derivatives is playing a key role today to ensure that corporate profitability does not get derailed in this increasingly volatile environment. Moreover, commodity futures facilitate efficient price discovery, benefitting all stakeholders and market participants, particularly farmers. Little wonder, therefore, commodity futures trading has become one of the most rewarding operations for the Karvy Group.
The boom in global commodity markets was triggered by the ultra-low interest rates in the US during the first half of the last decade. As a result, a huge wall of money found its way into multiple markets and asset classes, causing a global multi-asset boom. Commodity prices moved up sharply during the last decade, driven by significant speculative activity and huge consumption demand from emerging markets like China. So, it can be understand commodity prices are determined largely by supply and demand interactions in the global marketplace. The result—prices have been overwhelmed with excessive volatility, making it difficult for companies to manage their exposures effectively. Given the scenario, commodity futures help companies to hedge their exposures and minimize risk.