commodity risk

Commodity risk refers to the uncertainties of future market values and of the size of the future income, caused by the fluctuation in the prices of commodities. These commodities may be grains, metals, gas, electricity etc. A commodity enterprise needs to deal with the following kinds of risks:

• Price risk is arising out of adverse movements in the world prices, exchange rates, basis between local and world prices. The related price area risk usually has a rather minor impact.
• Quantity or volume risk
• Cost risk (Input price risk)
• Political risk