International Grains Markets.

The international Grains Market has two main components: Firstly we have the physical market where the actual grains are traded and secondly we have the futures or derivatives market where the instruments derived from the physicals are traded.

I will for now focus on the derivatives market.

People often ask why is there such a thing as a derivative with grains?  Well the futures market exisit purely to assist the physical market to get to a reasonable price.  What happens is that the buyers and sellers arrive at the "market" which is these days literally a computer screen where as it used to be "the pitts".  On the Chicago Board of Trade the trading is still mostly done in the traditional way especially during the day.  The so-called "overnights" and international trading would be electronically traded.  In this process the bids and offers they arrive at a price.

The process is that the most of the deals on the derivatives are for delivery on a date in the future.  That is why they are called futures.  The normal point of view is that the party that sells the contract has the larger exposure and usually has to be the party that eventually hold the underlying.

Exactly this has lead to the development of yet other derivatives with the same underlying stock or commodity.  That is options.  There are two types of options so-called call options and put options.

In this blog I am going to discuss the detail regarding Futures, Options and then get to the effect of the physical trading.

For now lets work with the details and consider the market and the prices - delayed "live" prices will be shown on this page soon.

Greetings
JD