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The Public World of Global Commodity Trading

by Nikolas Perrault 3 months ago in investing
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Commodity trading is an essential part of diversifying one’s portfolio

https://nikolasperrault.net/the-public-world-of-global-commodity-trading/

Companies that specialize in trading, buying, and selling different assets are known as commodity trading firms. In other words, these companies focus on physical inventory and its potential value.

Global commodity trading takes this concept to a whole new level, exchanging resources and assets from all over the world. This has been happening for hundreds of years. This is how essential resources travel from one hand to another.

Commodities

Typically, commodities are separated into four categories: metal, energy, livestock/meat, and agricultural. Items such as crude oil, natural gas, coffee, copper, and wheat are topping the list of commodities.

Commodity trading is an essential part of diversifying one’s portfolio, though it is frequently considered risky, especially for the inexperienced. It’s harder to predict supply and demand flows for physical commodities, particularly when factors outside of human control have significant impacts—factors such as the weather and natural disasters.

Historically, commodity trading significantly impacted trade routes, travel patterns, and even relations between nations. Many of the most common trade routes were named for the products frequently transported, making it simpler to follow the historical trail left behind.

Principals of Commodity Trading

Commodity Trading is heavily reliant on supply and demand. The public demand is balanced against the ability to supply. If an item becomes harder to source, the price goes up accordingly. The reverse is also true.

The world saw a significant shake-up to commodity accessibility and prices following the COVID-19 outbreak. Many ports closed down, creating unpredictable shipping routes and further complications down the road. This complicated the entire process of supply and demand, especially as demand quickly outpaced supply.

Top Commodity Trading Firms

Naturally, as with any industry, some companies and firms excel within the business. Global commodity trading is no exception to this rule, and some of the top firms include Vitol, Bunge, Olam, Koch Industries, and Archer Daniels Midland.

Vitol was founded in Rotterdam in 1966, and the firm primarily focuses on energy. This includes everything from extraction to storage and anything in between. Currently, Vitol is the largest independent energy trader.

Bunge is another top commodity trading firm, established in 1818; it is also one of the oldest. Bunge works predominantly with agriculture and food, both on an international scale – with employees in over forty countries.

Meanwhile, Olam is another food and agricultural company founded in 1989. They are best known for their supply of cocoa beans and related products.

Koch Industries was founded in 1940 in Wichita, Kansas. Koch Industries is a well-diversified firm and is actively involved in manufacturing energy, polymers, and minerals, among other things.

Finally, Archer Daniels Midland (ADM) was founded in Chicago, Illinois, in 1902. They specialize in multinational food processing and the trading of hundreds of different commodities. ADM manufactures protean meal and vegetable oil items and is ranked #54 on the Fortune 500 list.

About The Author

Nikolas Perrault is a Chartered Financial Analyst with significant experience in the financial, technology, and natural resources industries. As founder and CEO of M&A and Capital Market Advisory consulting firm Twilight Capital, Mr. Perrault provides strategic advice to select clients on a global scale. Twilight’s primary focus is natural resource companies. Additional areas of interest include AI, healthcare, and Fintech.

Nikolas Perrault was born in Rwanda and has traveled extensively for decades throughout the world. He has a passion for discovering new cultures and building bridges between them. Twilight is on a constant quest for opportunities to connect entrepreneurs internationally and to assist public and private companies in their overall capital market strategy. Earlier in his career, Mr. Perrault served as an investment executive with some of Canada’s largest institutions, including National Bank, Merrill-Lynch, CIBC and Scotia Capital.

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About the author

Nikolas Perrault

Nikolas Perrault is a Chartered Financial Analyst at the helm of Twilight Capital, a capital market advisory consulting firm based in Montreal, which he formed in 2008.

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