Managing Forward Curves in a Complex Market

Any company that owns commodities, either through production or merchant activities, needs to know not only the current value of those commodities based on market prices, but also needs to develop a view of the future value of those commodities during the time that they are projected to be held in inventory. Additionally, agreements to purchase commodities in the future must be accounted for, not only at their agreed or projected purchase price, but also during their anticipated holding period.

Commodity prices are constantly changing and are driven by market forces that are virtually impossible to predict with any degree of certainty. As such, accurately forecasting costs and price exposures is difficult at best, and particularly so now, given the rapidly changing supply and demand patterns that define the global commodity complex. Huge growth in demand for all commodities in Asia, the rapid rise of agricultural exports from developing countries in the Asia-Pac region, and the shale revolution that is driving unprecedented growth in US oil production, are all examples of the new dynamics that have fundamentally altered price formation in markets around the world. In this globalized and increasingly interconnected market-place, which is being constantly buffeted by economic uncertainty, predicting future prices is more difficult, but perhaps more important, than ever.

Read the document online or download it from the CTRM Center Managing Forward Curves in a Complex Market

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The Use of Spreadsheets in Commodity Trading – 2015

Spreadsheets have long been an integral part of a trading company’s armory of tools and software. Over the years, the demise of the spreadsheet in commod- ity trading organizations has continued to be predict- ed with increasing frequency and regularity, and yet, the spreadsheet is alive, well, and kicking in 2015; as this survey proves. Despite the growing maturity of commercially available Commodity Trading and Risk Management software (CTRM) solutions, the increase in regulation and oversight and, the alarm- ing number of horror stories involving spreadsheets in losses, mistakes and fraud, they seem difficult to eliminate. This survey, prompted by current round of regulation and controls, revisits the spreadsheet in commodity trading to discover how widespread and pervasive they are and why.

The survey was conducted as an electronic questionnaire promoted via Commodity Technology newsletter and other email lists as well as on social media and the CTRMCenter website. It received 133 responses between early November and mid-December, 2014, which after eliminating incomplete responses or those submitted anonymously, was reduced to a set of 50 valid responses from identifiable participants. The distribution of the valid responses was primarily from Europe and North America and from across the entire commodity trading sector.

Read the document online or download it from the CTRM Center The Use of Spreadsheets in Commodity Trading – 2015