As summarized by Hilary Till, Contributing Editor, Global Commodities Applied Research Digest

In the paper, “Optimal Trading and Shipping of Agricultural Commodities,” the authors use a case-study approach to show the benefits of jointly planning trading and logistics for a specific Argentinian grain-trading firm. Given the low profit margins of such firms, such an approach should be of interest to comparable firms in Latin America. The paper’s methodology may also be applicable to large firms in other geographic locations, which are similarly involved in the trading and shipping of grain.

As summarized by Hilary Till, Contributing Editor, Global Commodities Applied Research Digest

In this article, the authors find a counterintuitive result. While one might expect that firms with both an informational advantage and a robust financial condition to use these competitive advantages to vary their hedging programs according to their market views, the researchers, in fact, find the opposite result. This finding should be of interest to investors in gold equities, who should probably have a skeptical view regarding a firm’s decision to “selectively” hedge, which the authors also refer to as speculation.

Why do some futures contracts succeed and others fail? Although the U.S. futures markets have evolved in a trial-and-error fashion, a survey of relevant research suggests key elements have determined whether particular futures contracts succeeded or failed. This knowledge could be useful for new financial centers as they build successful futures markets. This paper shows that there are three elements that determine whether a futures contract succeeds or not: 1. There must be a commercial need for hedging; 2. A pool of speculators must be attracted to a market; and 3. Public policy should not be too adverse to futures trading.

This survey paper discusses the (potential) structural sources of return for both CTAs and commodity indices based on a review of empirical research from both academics and practitioners. The paper specifically covers (a) the long-term return sources for both managed futures programs and for commodity indices; (b) the investor expectations and the portfolio context for futures strategies; and (c) how to benchmark these strategies.

This collection of four digest articles provides answers to the following questions:

• When has OPEC spare capacity mattered for oil prices?
• What are the sources of return for CTAs and commodity indices?
• What are the risk-management lessons from high-profile commodity derivatives debacles?
• What determines whether commodity futures contacts succeed or not?

The goal with each of the four digest articles is to provide both industry participants and policy makers with useful insights on the frequently opaque, and always dynamic, commodity markets.