Commodities

Introduction

Investment Channel has taken step into the feild of Commodities. The group has arranged a team of professional for working on throse products and commodities which are used in daily life of a common man. This Marketing / professional team had worked out under the administrative control of Director Marketing

As per survey report of our professional team, if you walk through any supermarket or major store today and you will see the shelves lined with coffee, corn flakes, clothing, meat and even financial products. Orange juice from Spain or Florida, sugar from Central America, cereals made from oats and wheat produced in many parts of Europe and the Americas. We all consume these commodities on a daily basis but never really wonder how these items are priced, where they come from, how they get to these shelves and how they are regulated. Without the existence of the commodity futures markets around the world many of these commodities would never make it to our dining rooms or jewellery shops or hardware stores.

The words ‘futures’ and ‘commodities’ are often used together and describe the financial, physical and more exotic instruments which are traded throughout the world. Commodities are items like wheat, corn, gold and silver and Cattle and Crude Oil. It is possible to trade European rapeseed on the MATIF exchange in France to Azuki red beans on the KEX to Palm kernel oil on the KLCE. The most actively traded markets are now found in the US where the main exchanges, CBOT (Chicago Board of Trade) and CME (Chicago Mercantile Exchange) turn over millions of contracts daily.

At a simplistic level when farmers take their crop to “market”, they are selling commodities. To understand how you, a speculator fits into the picture, let’s look at a commodity from start to finish. Let’s look at a wheat farmer who planted his crop about three months ago and in two months it will be ready to harvest. After careful analysis, the farmer calculated that it had cost about $2.50 a bushel to grow it including overheads. Anything he can sell it for over $2.50 is profit.

Right now, wheat is selling for $3.00 a bushel but the price has been going down a little every week for the last few weeks. Since it’s going to be three months before the crop is ready for harvest, what can the farmer do? He is concerned that if the price continues to drop over the next three months, the price may be lower than $2.50 a bushel, which is what it cost to grow it. So what should he do? He could sell the future crop at today’s price of $3.00 a bushel by calling a Broker and selling a futures contract at today’s price of $3.00 a bushel to be delivered three months from now.

The risk in doing this is that if the price of wheat goes up to $3.50 a bushel during the next three months he will still only get $3.00 a bushel for it because it was pre-sold today for $3.00 a bushel. But on the other hand, if the price of wheat drops by then, he will have locked in at a price of $3.00 a bushel. This seems like a good way to go since the price of wheat has been going down, not up, in the last few weeks.

When the Broker gave a price to “sell” a contract, he acted as a middleman to find someone who would “buy” the contract. Now who would want to buy the wheat contract at $3.00 a bushel? Of course it’s someone who is buying wheat and is concerned that the price of wheat will go up, not down, three months from now and they want to protect themselves in case of a price increase. So, the farmer sold a contract to lock in profits and the other person bought a contract to lock in their price and the Broker acted as a middleman and earned a commission for doing this.

However if you were a speculator you would carefully analyse the charts on wheat and yes indeed the price has been dropping and it looks like that the price is going to stop dropping and start to go back up again. The speculator thinks that in three months it’s going to be $3.50 a bushel, not $3.00 a bushel that it’s selling for today.

The speculator senses an opportunity to be able to buy a contract at today’s price of $3.00 a bushel and hold it. If he is correct and the price goes up, he makes a profit on the commodities contract. When he buys the contract at today’s price of $3.00 the person who sold the contract guarantees him that price. They must honour their end of the bargain and sell it to the speculator at $3.00 a bushel, even it the price goes up.

On the other hand, if the price goes down, the speculator loses money. How would he lose money? Because if the price of wheat three months from now is $2.50 a bushel, that means he can only sell it for $2.50 a bushel yet he agreed to buy it for $3.00 a bushel because he bought a futures contract. (When someone buys a contract that means he thinks the price is going up and makes a profit if it does. This is also called “going long”. When he sells a contract he thinks the price is going down and

makes a profit if it does. This is also called “going long”. When he sells a contract he thinks the price is going down and makes a profit if it does. This is also called “going short”).

The major difference in making money in stocks vs. commodities is leverage. For example: a contract in wheat is for 5,000 bushels. You don’t actually buy or sell 5,000 bushels you just control 5,000 bushels. You would put up a “deposit” with a Broker for the right to do this. In the case of wheat, that “deposit” which is also called your “margin”

By Muhammad Tariq Ghous

Managing Director( Al Zahrani Group )
The Company is involved into the following Commodities

WHEAT & PRODUCTS WHEAT
FLOUR WHEAT
BRAN WHEAT
MACARONI
GERM WHEAT
BREAD
BULGUR
PASTRY
WHEAT,STARCH
WHEAT GLUTEN
BREAKFAST CEREALS
WAFERS
MIXES AND DOUGHS
FOOD PREPARATIONS OF FLOUR MEAL OR MALT EXTRACT
RICE & PROD (MILLED EQ.) RICE, PADDY
RICE,HUSKED
MILLED RICE FROM IMPORTED HUSKED RICE
MILLLED PADDY RICE
RICE,BROKEN
RICE GLUTEN
RICE,STARCH
BRAN RICE
RICE FLOUR
BARLEY & PRODUCTS BARLEY
POT BARLEY
BARLEY,PEARLED
BRAN BARLEY
BARLEY FLOUR AND GRITS
MALT BARLEY
MALT EXTRACT
MAIZE & PRODUCTS MAIZE
GERM MAIZE
FLOUR MAIZE
BRAN MAIZE
MAIZE GLUTEN
STARCH MAIZE
GLUTEN FEED & MEAL
RYE & PRODUCTS RYE
FLOUR RYE
BRAN RYE
OATS & PRODUCTS OATS
ROLLED OATS
BRAN OATS
MILLET & PRODUCTS MILLET
FLOUR MILLET
BRAN MILLET
SORGHUM & PRODUCTS SORGHUM
FLOUR SORGHUM
BRAN SORGHUM
CEREALS,OTHERS &PRODUCTS POP CORN
BUCKWHEAT
FLOUR BUCKWHEAT
BRAN BUCKWHT
QUINOA
FONIO
FLOUR FONIO
BRAN FONIO
TRITICALE
FLOUR TRITICALE
BRAN TRITICALE
CANARY SEED
MIXED GRAIN
FLOUR OF MIXED GRAIN
BRAN MIXED GRAIN
CEREALS – NOT ELSEWHERE SPECIFIED ( hereafter: NES)
FLOUR CEREAL
BRAN CEREAL
CEREAL PREPARATIONS NES
POTATOES & PRODUCTS POTATOES
FLOUR POTATOES
FROZ POTATOES
POTATO STARCH
POTATO TAPIOCA

Terms And Conditions

As you know we are in a diverse of trading lines but we are a long time in Export and supplier business and have thorough knowledge of our business and keep ourselves updated with every day world prices of commodities and the its market. We are not Mr. ANONYMOUS from internet, doing business from their bedrooms and trying to find first the seller then the buyer so we are not a online broker!! but serious and real Multinational Company. You can see, we know the market situation and the prices very well -our prices are unbeatable.

First your customer has to understand our terms and conditions and accept all. If you are 100 %b sure that your client can work with it and will accept all of them, we can move this deal any further.

PLEASE DON’T SEND US YOUR OWN TERMS AND CONDITIONS

Because any discussion on other terms and conditions is pure waste on time!

We don’t want to waste your and our time with UNNECESSARY negotiation. Read once more our information please. If you can work with them it would be great pleasure to make the businesses with you in the future.

If you (or your buyer) can not accept it, we are so sorry it will be better to save our time and you can go to find another real supplier (for more money).

AVAILABLE CONTRACT TYPES

  1. Standard Contract: LC based only, BL is
    required for payment, 2 % PB after opening of LC.
  2. Deposit Contract: 10% deposit (of full contract value) plus monthly revolving LC to
    cover the remaining 90%. No restrictions: buyer’s inspection allowed and ALL
    documents required for payment.
  3. Cash Contract: 10% deposit (of full contract value) plus monthly TT for the value of
    each shipment (deducted of 10%). Payment should be against Invoice only. All
    documents delivered to the buyer, with the shipment only.

After choosing the contract type that best matches Buyer’s needs, a Sample
Sales Contract is sent for Buyer’s review and acknowledgement of the full
terms and conditions. It is a sample contract, not a draft contract, and
therefore it’s not subject to any changes, amendments or additions.

If Buyer agrees to above terms and is ready for contract, he must send a
signed and sealed LOI in his letterhead, with full banking coordinates.

We can work only with LOI containing all required information (see below).

LOI must include (please use this as a check list):

a. Buyer’s full company name, address, telephone, fax and email
b. Signatory name
c. Ship-to Company’s full details (if different from Buyer). This is the company that receives the product at destination.
d. Type of product requested
e. Target Price/MT CIF
f. Quantity/month (minimum 30.000mt/month)
g. Length of contract (minimum 1 year)
h. Preferred origin (or at seller’s discretion)
i. Country of destination
j. Unloading port
k. PB requested
l. Number of banking days required to open LC
m. Complete bank details (name, address, contact officer, tel, fax)
n. Account holder
o. Account number
p. SWIFT Code
q. Type of contract required

BCL IS ALSO REQUIRED.

Upon receipt of this LOI and BCL the final Sales Contract is sent for Buyer’s signature.

For further information Please feel free to contact us

Jennifer – Operational Manager

13 Jul 2007