A commodity is generally defined as impressive that is measured to be of a value, has the superiority that is comparatively consistent, and is produced generally in hefty amounts by various different producers. While people wish to invest in commodities, they usually think in terms of objects that are resources that might be bought for a wide variety of uses. Let's us take an example that, tea is considered to be a commodity and is always traded on the foundation of the extensive range of supplies that can be generated using tea as a fundamental ingredient.
Consecutively to trade commodities, it is very necessary to get involved in all the transactions conducted on basis of a commodity exchange. The functioning of commodities is in a manner very analogous to a stock exchange which is quite true; there is such exchange that deals directly with all the commodities all over the globe. Though, it is not essential to bind the commodity trading to such one fastidious exchange. Investors are liberated to buy and sell on various exchanges if they desire so and are accepted by all the exchange.
The procedure of the commodity trading is frankly affected by the existing relationship flanked bythe supply and demand for a known commodity. Any issue that limits the supply may reason the value of the residual quantities of the commodity to increase in value extremely quickly. For instance, if a natural disasterthat will wipe out a important portion of tea, the value of the remaining tea property would be in a greater stipulate. As a consequence, the price for the remaining commodity would gradually rise and any of the investor with the investments in the tea market would stand a great chance of receiving a considerable return.
At the same instance, a surplus of a commodity that surpasses the current level of claim may drive the component price down. This might result in a loss to the shareholder, assuming the price falls lower what was initially paid for the venture. Frequently, the commodities shareholder will have to make a decision whether to take in the loss or thwart additional losses by the way of selling at the existing lower unit price, thus it leaves no further option for the investor. There shows that there is no hope for the commodity to make progress within a practical amount of instant, the investor is expected to sell his commodities. Though, if there is any indication that the commodity will try to recover and the demand will go up within a short period of instance, there is a great chance that the savings will remain in place in the expectation that of reclamation all the losses at a later time, but not now.
As in the case of stock trading, the commodity trading absorbs some amount of risk. Investors try to monitor the connection between the supply and the demand and how that factors impacts the useful information currently accessible through a commodities price index. While the commodities are typically considered more to be consistent and the same time stable than some of the other forms of investing, thus there is always the possibility that natural disasters, changes in the consumer experience, or political matter may negatively impact the value of any of the commodity.
Let's talk about the commodity we are talking about that is the tea. We all know that tea was the leaf of the shrub of the camellia family native to China, is almost certainly the first plant to have been cultured specifically as the foundation for a non-alcoholic drink which was rare that time.
The Chinese legend distinguishes its discovery with the attractive but doubtful stories from the early times. However the enjoyment of tea is clearly known since about 350 BC, when the word featured in the Chinese dictionary.
The commodity became popular when the when the tea they produced was enjoyed by other countries across the world. Thus it was so beneficial for the Chinese that they made the tea as their currency. That time for them it was a key trade feature for them. In the late centaury, the truth was that the need for the reciprocal trade is based on the all the European sides because of the fact that in the west, generally Britain, had gradually developed a passion for one important particular Chinese product that was tea. At the same time the Chinese were very happy to sell their tea to European and British merchants, but the only thing they wanted was only hard currency in exchange of the tea. This mean that precious and valuable silver was drained from the west just as gold was flowed from Rome along the silk route.
In the later stages the British had solved their trade balance by supporting a Chinese addiction which was greater than the English thirst for the tea. A British company, The East India Company had to grow opium in India for the Chinese market. The British was so determined that in order to satisfy their thirst they were ready to do anything.
Looking in the modern time the commodity we are talking about, tea can be termed to very profitable. Some of the few reasons are that it can't be sowed anywhere and it consumed every day. The tea is sowed in the hilly areas and those areas where the soil is suitable for it. Generally the harvesters build their tea farm near that only to be more accessible. When the tea plant is ready, then the farmers can pluck the leaves of that plant. After they collect all the leaves then go and dump all the leaves in nearby factory for the processing of the leaves. They are sterilized and processed for some time. After they are sent to the traders, who sell the commodity to the whole-sale dealers, these are later sold to the concerned shops and then to the customers.
There are various problems that are linked and faced in the entire process of cultivating tea as a crow that are faced by the cultivators. Tea is a plant that is faced with various bugs and other insects as well as certain small animals that chew on the crop in the fields even when the crop is growing or is ready to be reaped. The plant is consumed by these external agents near the root end of the plant which causes the plant to perish permanently, leaving behind a very permanent and pungent odor in the fields. However, this smell spreads quickly in the field and often scares the other insects and animals off, thereby protecting the plant from future damage and the plant that is destroyed can also now grow from scratch. Other natural phenomenon also cause problems with the proper cultivation of this plant like the temperature and humidity, the amount of flowing water made available and also the slope of the land where cultivation is taking place. The grow is most preferable hand grown as numerous sessions of watering it is required at times when the sun is beaming bright.
We know that growing tea is not an easy task. So there must be some organization that must help in the plantation of this herb. Also this herb can only grow in some part of the land, so special care should be taken so that it can be grown properly. Some extra care should also be taken so that the tea plant is not destroyed due to heavy rainfall or some kind of storm. Another key point that should be considered is that it should be distributed well, so everyone can enjoy the flavor of the tea.
Another point we can see is that the cost of this commodity varies from place to place and from time to time. In the above chart we can see is that there cost of tea in three places that is Calcutta, Colombo and Mombasa varies. The main reason is that all the places have different climatic weather and the point that can affect the cost can be how well it is distributed in different parts.
- Wisegeek official site. (n.d.). Retrieved on May 18, 2010 from http://www.wisegeek.com/what-is-commodity-trading.htm
- Gascoigne, B. (2001).History of Trade. Retrieved on May 18, 2010 from http://www.historyworld.net
- Lawton, J. 2004.Silk Scents & Spice.Paris: UNESCO