Commodity trading is a lucrative and growing business. But what exactly is commodity trading and what is the best way to trade in agricultural commodities? Let’s take a look at both of these questions and how they relate to trading opportunities with Kimon International and beyond.
What is Commodity Trading?: A Simple Definition
Successful commodity trading is a complex business requiring expertise, talent, and networking; however, the basic concept of commodity trading is a relatively simple one.
Commodity trading can be defined as simply moving raw materials from one owner to another at an agreed price. This transaction hopefully provides the buyer with the goods they need and the seller with a good profit.
Furthermore, those investing in the sold product will reap the financial rewards of investing in trading companies. As their profits rise through trading commodities, investor share values increase, as do any dividends or shareholder payouts.
One of the most effective ways to make a reliable profit is to trade in agricultural commodities. When producers, traders, and buyers are brought together within the agricultural sector, invariably they all increase their financial viability. Kimon International facilitates this relationship between all three groups for mutual benefit and growth.
What is Agricultural Commodity Trading?
Kimon International specializes in the trading and supply chain management of agricultural commodities. Agricultural commodities provide significant revenues for traders and investors, while providing sustainable goods to the world in an ethical way.
In agricultural trading, the commodities in question are either grown or raised on farmland. This could be anything from cattle livestock to planting trees for the timber trade.
Agricultural commodity trading supplies the ingredients for food, clothes, construction, and medicine. It is an essential part of human activity. We need strong agricultural trading in order for the world to remain stable and prosperous.
Though average margins for traders are between 0.5% and 3%, putting it in line with other sectors such as retail, commodity trading offers an excitement and quick scalability to higher profits which most other sectors simply cannot provide.
Understanding the Commodity Value Chain
An important part of commodity trading is the commodity value chain. This complex line of interactions and events is what links the production of agricultural goods to the eventual sale. It can even be linked to post-sale processes in manufacturing and buyer demand which can loop back and affect the value of these traded goods.
Without someone looking after the supply chain, commodities would not have their inherit value because they would not be able to find buyers on a global scale.
What creates the value of produce is complicated, and it is one of the reasons that Kimon International helps producers, traders, and investors, to create an efficient, sustainable, and profitable supply chain through effective management.
We can break down the supply chain into: Producers, Traders, & Buyers. For example, a producer grows sugar cane on their farmland. She then harvests this sugar cane.
The buyer is a confectionery company which needs the sugar as an ingredient in its chocolate products. It is the trader’s job to bring both the producer and the buyer together.
The trader sells the sugar to the confectionery company, taking a small percentage of the profit, ensuring that the producer receives the bulk and is able to keep producing and growing commodities.
Kimon International facilitates all of this as a world class organiser, managing this intricate supply chain and ensuring that the process is tailored specifically to each commodity and sector. This creates the ultimate value for each unit sold.
Our goal is to be essential to both traders and producers in equal measure.
Commodity Trading and Volume
We can see then how supply chains are managed by those with expertise, but what many who are new to trading in agricultural goods sometimes overlook, is the necessity of volume.
Commodity trading in general relies heavily on volume. We already mentioned the 0.5% to 3% profit margin, and while that might sound small, when this is scaled to selling millions of units, the profits quickly stack up to many billions of dollars for each commodity per annum.
It is the responsibility of a trader then, to move as many units as possible.
By doing so, value is added to the commodity and to the market in general. Crucially, value travels back down the supply chain to the people who matter most – the farmers and producers of each agricultural commodity.
To successfully trade any commodity, then, volume is imperative. With a worldwide network and years of experience within the agricultural community, Kimon International specializes in delivering high volume and, therefore, high profit results.
Learn More About Agricultural Commodity Trading
If you would like to become one of our many trading partners in the agricultural sector, you can contact one of our trading and supply chain experts today.
If you would like to learn more about agricultural commodity trading or commodity trading in general, then feel free to peruse our extensive list of articles, packed with tips and powerful information to gain the best results for producers, traders, and investors alike.