Commodity Exchanges are organized agricultural product markets where the standardized, separated or sample-represented products consumed, produced, exported or imported. Products may be resistant and convenient for storage and have a variable supply and demand. Also the market where wholesaled within the conditions of free competition and pre-stated maximum quantities.
First commodity exchange in our country was founded in 1892 in Izmir. Today, we have 56 city and 54 province based commodity exchanges in Turkey. In 2001 transaction of commodity exchanges was 17.2 million Turkish Liras.
With the purpose of facing salesmen and buyers, commodity exchanges ensure that the prices are created within conditions of free competition. Especially futures exchanges with products and commodity exchanges have become indispensable in global economy.
Products and Commodity Exchanges
Price and income instability generate two basic features of agriculture products markets. Income instability has reasons both supply and demand sourced. Agriculture is a sector depending on climate therefore the prices are stable while harvesting season but they increase besides this period. With stackable products, this increase is slightly controllable but there is not a way of controlling the increase at the prices with the other products.
The most modern way to remove the financial burden of the government and to place the agriculture products to free market is to put futures exchanges into action. Thus the agriculture product will find their true value, a more qualified production will be encouraged because of the product standards and futures trading will provide a healthier goal for agriculture industrialists and an easier picture for produces.
One of the most important steps that shall be taken for improving exchanges is to switch to product based commodity exchanges. This kind of exchanges need to specialized on few, preferably on one kind product.
Especially futures exchanges are very important when it comes to planning the production, evaluate the stocks, benefit the risk factors in a more rational way and the most important of all to create a healthy financial system aka a tax system.
Futures Exchanges which create the bases of a modern exchange system, is the place where an agricultural exchange product with a standard quality and quantity gets set on a contract to be sold for a certain price and to be delivered and received on a certain date.
The main purpose of the futures exchange market is to provide a secure system for both salesman and buyers against the risk can come up with the price developments.
For an industrialist who processes agricultural products and sells them, futures contract creates a security system to be referred to eliminate the risk of uncertain increase on the price, prevents the instant increase and drop on the prices and the futures contract also protects the producer from the future-price risk by directing production choices and constituting a reliable indicator for agricultural sector.
Futures exchange market, volumes up the supply and demand. Therefore provides connections for Turkish industrialists for them to make long term relations with foreign markets.
Benefits of Exchanges
Benefits of the commodity exchanges can be listed as following;
As the products which farmers produce, reach its true value within the existing terms of the market, the financial burden of the government due to its policy to encourage agricultural sector, decreases.
Sale and purchase of agricultural and animal products are recorded. Unregistered economy is known by records therefore stoppage and tax evasion is prevented for these products.
Commodity Exchanges stabilize the fluctuations that could not be foreseen.
Commodity Exchanges Provides Advantages to whom works in Construction Market;
Businessmen, are free of risk by being compatible with the committed date of delivery and quantity and also by term purchases.
Commodity Exchanges Provides Advantages to Exporters;
Producers and exporters are able to retrieve committed quality, price and date of delivery of exported products by making term purchase contracts.
Commodity Exchanges Protect Consumer’s Benefits;
Commodity Exchanges contribute to the creation of true and fair prices by partly compensating season and location sourced price differences of the agricultural products which are very common for production and consumption.
Commodity Exchanges Provides Benefits to Producers;
Exchanges are market places where producers can offer their products to big amounts of buyers. Therefore products can find their true value on the day’s conditions.
Only registered members are allowed to enter and take action in commodity exchange. Only exception of this limit is the agricultural producers. Therefore, agricultural producers form a big population in every commodity exchange.
Arbitration Management on Dispute Solving prevents Leeway;
Any dispute between members are solved by board of arbitrators.