The morality of a commodity fund

Hi! Been trading commodities for a few years now.

Have heard that futures trading has adverse effects on the developing markets where a lot of commodities are produce using labour in less than perfect condition.

Would like to know your thought on if it's morally perfect and is positive for all involved in the actual procurement of the commodities to trade commodity futures?

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Comments (19)

Most Helpful
Apr 10, 2019 - 2:39pm

Can you imagine what those folks would be left to without the global reach of commodities?

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Apr 10, 2019 - 10:38pm

Not entirely sure what you are getting at. Futures should smooth out the procurement experience which is a net positive for people working on the production size. Some research points to speculative activity in derivatives elevating price levels but the negative impact would be felt by consumers in that case.

Apr 11, 2019 - 12:12pm

there are no adverse effects...whoever told you that has no clue what they are talking about

just google're welcome
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Apr 12, 2019 - 11:59am

I'm assuming your view point here is comming from all the articles recently about coffee and milk producers being hurt by a slump in futures prices. In both cases that slump is caused by oversupply. The oversupply is caused by stupid government attempts to manipulate the market. So maybe instead of asking yourself if commodities are immoral you should be asking yourself if the government actions are moral.

Apr 12, 2019 - 8:22pm

Is that why Cafe Grumpy is always out of Oatly?

“Doesn't really mean shit plebby boi. LMK when you're pulling thiccboi cheques.“ — @m_1
Apr 13, 2019 - 12:52pm

All joking aside, there are different studies about this topic and various publication. Speaking from my experience and point of view, we have seen in power markets how this plays in favour of consumers.

Let me explain, in European gas and power markets we have different levels of integrations, with month ahead markets more developed than day ahead.
Integration in the one-month-ahead markets is mainly driven by NBP hub, acting as referential hub, which suggests price convergence driven by financial trading rather than by physical balancing
On the other hand, day ahead is way more exposed to physical transmission

I think that for other commodities could be the same; ie implications related to the law of one price

TLDR, Financial derivatives are great tools in integrating markets and do not mine labour etc.

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