Commodities Strategy: Grains and Gains

REPORTING - Commodity risks and their volatile impact on profit and loss - Starbucks have a big exposure to dairy—to milk and didn’t have any means of fixing price with their suppliers. When it comes to coffee, Starbucks’ coffee trading group, which buys coffee worldwide, executes the risk management. Starbucks measure their

A commodity is a raw material or primary agricultural product that can be bought and sold. The market treats it as equipment or nearly so with no regard to who produced it. The original producer does not make the “big” money from the good that has become a commodity demanded by consumers. A commodity’s supply and demand is part of one universal market like corn, or wheat. A stereo is something that would not be considered a commodity. Other things are important about a stereo not that it is just a stereo but what brand and quality is in consideration when purchasing a stereo. Demand for one type might be much larger than the demand for another. This is not the case with commodities; they lose differentiation across their supply base. An

In 2014, Russia captured the Crimea and Sevastopol, and unfurled tens of thousands of troops near Ukraine border. This is where the conflict flashed between pro-Russian separatists and the new government in Kiev. Russia's actions, including reported military aid for separatist troops, mark a serious major threat to generally accepted principles of world order, such as, sovereignty and

While chaos continued to spread across the country, Russia began to eye the territory of Crimea, one if Ukraine’s most southwestern territories and an area that used to belong to Russia until it was transferred to Ukraine in 1954. By the end of February, masked Russian troops without insignias took over the Supreme Council of Crimea and several strategic sites across Crimea. This event led to the installation of the pro-Russian Aksyonov government in Crimea and the declaration of Crimea 's independence. This spurred the Ukraine’s provisional government to request an emergency meeting with the U.N. Security Council in which they called on Russia to stop all military action in Crimea. By Mach 1st, Russia’s parliament approves President Putin 's request to use force

in capitalism, the production of commodities is based on an exploitative economic relationship between owners of factories, and the workers who produce the commodities. in everyday life, we think only of the market value of a commodity, in other words, its price. but this monetary value simultaneously depends on and masks the fact that someone was exploited to make that commodity.

There has been tons of contentions and conflicts in the second largest country in europe and while the news presents us all these ideas about what going there, the truth, as it always is, is much more complex. The recent turmoil in the Ukraine has brought up a lot of issues remembered in the cold war. Russia Annexing the crimean peninsula from the Ukraine scaring western powers, specifically the United States, into the old policy of Soviet containment and using any means to put negatives towards the “eastern block” preventing the spread of its influence. Although the United States and it NATO/European Union current policy’s towards the eastern block have attempted to contain this strong autocratic style of

nodes of the commodity chain. This part of the literature views producer and retail prices as

BHP Billiton is the world’s top producers of major commodities. China, as BHP Billiton’s largest export market, demand strongly influences the BHP Billiton’s operation (Western Australian Iron Ore Industry Profile 2015). According to the annual report of BHP Billiton (2015), China brought about 36.6% revenue in the amount of total export revenue for BHP Billiton, among the largest product is Iron Ore, which was 66% in 2015. Meanwhile, the forecast of iron ore will continue to increase production. However, Chinese steel consumption may growth slow next few years (shows in figure 1) because the real estate industry decline (Mark 2015). Therefore, oversupply and weaker demand may create the fluctuations in commodity prices which related to commodity risk.

The crisis in Ukraine and Crimea’s recent accession to Russia are events that clearly highlight the underlying sources of conflict in global politics. While Russia sees its actions in Crimea as a “reunification” and the respect for the right of self-determination, the West views it as a threat to European security and a violation of territorial integrity. Crimea has been a debatable topic from the time it came under the control of the Russian Empire in 1783 during the reign of Catherine the Great. The justification then was similar to the reasoning being used by Vladimir Putin today. Catherine declared that she was protecting ethnic Russians in the region from the Ottoman Empire, much as Putin is claiming to protect Russians from Ukrainian

Under international law Russia’s invasion of the Crimean Peninsula is illegal as the Referendum held on the 16th of March by Russia infringed upon the

commodity costs for commodities that can only be partially hedged, such as fluid milk, and high quality Arabica coffee;

In early 2014, Russia made the decision to conduct an illegal military intervention into Ukraine. It all began when there was a dispute over whether Ukraine should accept financial help from Russia or Europe, which then ascended into the ousting of the Ukrainian president and then invasion of Ukraine. More specifically, Russia began to taking over the Ukraine territory of the Crimean Peninsula through illegal use of force (Global Security, 2016). During that time, the Russian government voted to place Crimean’s into the Russian Federation, which had been rapidly accepted by the President of Russia himself, Vladimir Putin. Most of the Crimean population is ethnic Russians, although there are also the pro-Ukraine Tatar minorities that make

Raw Materials (Coffee Beans): Coffee bean farming is not vertically integrated into Starbucks; the company purchases coffee beans from farmers. Starbucks choose to outsource farming due to the low potential hold-up problem. For its coffee, Starbucks uses only high-quality Arabica beans, instead of regular commodity and lower quality robusta beans. Since there are a lot of market participants trading Arabica beans (i.e. farmers & Arabica beans buyers), there is an established market price. Moreover, farm land has a low degree of asset specificity, and therefore farmers’ investments do not depend only on Starbucks as

According to Goel and Gutierrez, they investigated that fluctuating procurement price is one of the causes of inventory risk and through trading appropriate numbers of futures or forward commodity contracts reduces inventory related costs for effective hedging. Hedging and the price discovery functions of futures markets facilitates not only a better inventory management but enhances the efficiency of marketing operations, production and storage.

• Primary commodities have fallen in price, or stayed steady, while commodities they need has increased, e.g. oil