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!
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.
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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:
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.
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.
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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.
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2 &#; Commodities and Futures Exchange (BM&F)
Located in Brazil, it trades futures contracts and other financial instruments.
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:
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.
Published: August
Many of our clients in commodity markets come to us feeling trapped&#;struggling to compete and survive as competition drives prices lower. Their question is simple:
How can we grow our business if price is the only thing that matters?
In answering the question&#;and growing many commodity businesses&#;we have found three things to be true:
In many commodity markets, &#;the winner takes all&#; (or at least &#;the winner takes most&#;). It is particularly true of online businesses. That truth carries an important implication:
If you want to be twice as profitable as your competitors, you don&#;t have to be twice as good as them. You just have to be slightly better.
This phenomenon is sometimes called the &#;slight edge.&#;
We have already shared many strategies for developing your own slight edge in pricing, offers, and competing with Amazon. The following article contains strategies especially relevant to companies selling commodities.
Offer a low initial price, then make money from subsequent sales. For example, many subscription companies (such as internet providers and television networks) offer discounted fees for the first six months of the contract.
Upsell or cross&#;sell your customers. Low-cost airlines are experts of this tactic. After you choose a flight, the airline will upsell luggage capacity, legroom, speed of boarding, and more. Once in the air, you are cross&#;sold food and drink, duty&#;free goods, or destination car hire. Ryanair even sells inflight scratchcards to help pass the time. Customers are thus able to select the components they value. Few flyers ever pay the commodity price.
Create a unique offer so it can&#;t be compared with competitors. Cell networks work hard to create unique plans that include a Netflix subscription or unlimited data for popular social networks. The most successful examples add genuine value for the customer.
Price lower than your competitors for products or services that can be compared directly, and have higher margins on others. Supermarkets compete on staple products like bread and milk&#;because people know what these items should cost&#;and make a profit on others, such as prepared foods and beauty products.
Market your product for a particular audience niche. Manufacturers of computer monitors sell gaming&#;specific versions that offer slightly tailored features and designs.
Give reasons why customers shouldn&#;t shop just on price. Do you pay your workers a fairer wage, have a better warranty, or use 100% renewable energy? If so, let your customers know.
Have the lowest &#;first-purchase&#; price, then profit later from related products and services. Home security companies sell low-priced hardware, profiting from the subsequent subscriptions. Razors are cheap to buy, and the companies make their profits on the blades.
Include personal rewards and extras for your customers. This strategy is particularly effective (and common) in B2B markets&#;where customers shop with their employer&#;s money. Consider ways of personally rewarding them. For example, make the order process frictionless, airlines give air miles for personal use, and office supply companies include free chocolates.
Reframe your commodity as a solution. Prospects buy solutions because of their value, not their price. For example, a sun cream could be marketed as simple UV protection or a solution to avoid premature aging. Building materials such as ceiling tiles are often sold as systems&#;with the tiles, connectors and fittings comprising an easy-to-install system.
Give away information, because it costs very little and can be really valuable to customers. In , fewer than 3,000 cars were on the roads of France. To encourage people to travel more&#;thereby boosting car and tire sales&#;Michelin distributed 35,000 free copies of their first guide, the Michelin Guide. It is perhaps one of the most well&#;known marketing strategies of all time.
Be top of mind when it matters. Diaper brands provide free supplies to neonatal units. Food manufacturers negotiate for eye&#;level positioning on supermarket shelves. Look for ways to get your product and services closer to the places (and moments) where your customers need them.
Many of our clients thrive in commodity markets, using the strategies above. By being slightly better than their competition&#;developing their own &#;slight edge&#;&#;they&#;ve seen game-changing profits.
Now it&#;s your turn.
Pick a strategy&#;aim for the one that matters most to your customers&#;then, once you have a &#;slight edge&#; over your competitors, don&#;t become complacent; choose another.
Where will you start?
We&#;ve generated hundreds of millions for our clients, using our unique CRE Methodology&#;. To discover how we can help grow your business:
Schedule your FREE strategy session
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