The term “commodity” tends to put off a lot of people. But when you are told, in simple language, that the nylon bristles on your toothbrush, or the bean that goes into making your coffee powder is also a commodity, it begins to make sense.
And something as complex as “commodity trading” becomes simpler when M.R. Subramani tells us in his book A Virgin’s Guide to Commodities: “Coffee beans are traded widely in various markets across the world and their turnover in the global commodities market is next only to crude oil.” Billions of dollars change hands in global coffee trade.
The author tells us how products are sold both physically and online, how the auction system works and, most important, how the prices are determined by demand and supply as well as fluctuating interest rates in different countries.
He also takes the reader through the intricacies of futures trading, which is based on market intelligence or surmise on whether the price of a commodity will be higher or lower three or six months later. A huge fortune can be made if you get this right.
In a market where authentic books on commodity trading are rare, this book fills a crucial gap. With his 20 years’ experience in journalism, Subramani is able to demystify a complicated subject. Interesting nuggets in the book include the section on commodity trading in the olden days when barter system reigned.
The importance of commodity trading can be seen from the fact that “civilisations thrived near river banks” because the river helped in both irrigating the crops and transporting them together with other products. Barter trade continued till the first coins surfaced in the 7th and 6th century BC. Interestingly, the motifs on the early coins were drawn from nature — sun, hills, trees, animals.
The chapter “India’s role in commodity market” describes how in 2007, when India banned the export of rice, its price shot up from $400 to $1,000 a tonne for the poor in Africa. Till then the price of rice had not crossed the $500-mark in the world market.
M.R. Subramani is News Editor, The Hindu Business Line