Canada's Commodity Exchange Network Explained

 Commodity futures markets offer a forum for the coordinated contract trading for future item delivery. These now cover a wide spectrum of goods including agricultural products, metals, forest products, petroleum fuels, interest rates, and stocks. Originally designed to solve the problems caused by the cyclical character of grain output, the futures markets were Grain has a limited harvest period and needs to be kept for use later on.

This situation could cause an excess of supply during harvest and a risk of shortages prior to the next one. Harvest brought producers often a market bursting with supply.

Prices could so drop drastically. Merchandisers, on the other hand, had to guarantee a consistent supply of grain to their customers considering the erratic grain sales and timing of farmers. While merchandisers and processors may be sure the price and supply will remain constant over the crop year, futures markets let growers decide a price for their product well in advance of its sale. Osaka, Japan, first set up futures markets in 1730. First seen in Chicago in the 1860s as a technique of boosting output on the American prairies, futures trading initially Likewise, the Winnipeg Commodity Exchange developed Canada's first futures market in 1904. Founded in 1980, the Toronto Futures Exchange trades on a floor shared with the Toronto Stock Exchange. In 1984, the Montreal Exchange created a lumber futures market; but, that contract has remained inactive since 1986. Future contracts for Canadian government bonds, Treasury bills, and the Canadian stock index are traded actively in Toronto. The overall volume of contracts traded in 1997 was incredible 317,508. Winnipeg is a trading center for various agricultural commodity futures contracts, therefore fulfilling native cattle feeding demand as well as global demand. These items call for flaxseed, rye, wheat, oats, and barley. Besides, the Winnipeg market offers gold and silver futures markets.

In 1992 the trading volume came to 2,462,922 contracts.

The biggest futures markets in the United States are in Chicago and New York; lesser exchanges also exist in Kansas City and Minneapolis. Markets abound in Europe, Asia, Australia, South America, and so on. Market for commodities futures are meant to offer a protection against any price fluctuations. Demand and supply define the prices for goods. These factors—weather, government policies, transportation, global production and consumer decisions—may have unexpected results. Prices of commodities can vary greatly depending on a lot of factors. For business manufacturers, merchandisers, and processors looking to guard against the unpredictability of price fluctuations, the commodities futures market is a valuable tool. One achieves this by means of a method called hedging. Hedging is a good way to control risks and cut marketing costs related to commodities.Main players in futures markets are these commercial companies. For instance, big borrowers like companies and big lenders like pension funds could find it difficult to negotiate changing interest rates before opting to deposit money or sell bonds. One strategy to reduce this risk is by investing in interest rate futures.

Farmers also have to pay for well in advance planting a crop, occasionally waiting up to 15 months before selling their output.

The younger generation finds a way to guard their selling price from the volatility of the worldwide grain market in the futures market. Apart from business producers and consumers of goods, futures markets appeal to speculators aiming to gain by foreseeing fluctuations in commodity prices. Their acceptance of the risk that commercial hedgers aim to avoid serves a crucial function. A basic but powerful way to smooth out market patterns and remove daily variations is with moving averages. Prices pointing above the moving average line show an upward tendency. Falling prices below the moving average line similarly suggest a declining trend. Moving averages are computed depending on a specified period. Depending on personal taste and how well they fit price swings for a given commodity, typical moving average periods for a daily chart may range from 3 to 100 days. Add the closing prices of the ten most recent days then divide by ten to create a basic 10-day moving average. The oldest closing price is deleted and replaced daily with the latest recent. The daily price as seen on the chart also features drawn moving averages. Many charting systems and tools let moving averages for price charts be computed automatically. Along with the 18- and 40-day moving averages, Image 1 shows the daily closing of the November canola futures contract.