Covid-19 has dramatically affected virtually all facets of the global economy. Business is not as usual, and traders, investors and other financiers have begun to search for new strategies and techniques to cope with the burdens of the pandemic. One sector particularly hit hard from Covid-19 is commodities.
Covid’s Effect on Commodities
The pandemic is challenging many nation’s economies around the globe. In some markets, trading was suspended entirely, and in others, it has had similar detrimental effects.
As evidenced by Commodity Markets Outlook, these effects will last for quite some time. Fortunately, markets are recovering, including energy commodities, which were most severely affected at the onset of the outbreak.
Prices of commodities are recovering into 2021, but recovery is wholly dependent on expelling and inoculating nations against Covid-19. Organizations like the World Bank are taking action to help developing areas vaccinate against the pandemic.
With Covid vaccination becoming widespread, commodity traders can expect to get back to business as usual, but that does not mean the pandemic has not left its mark on the industry.
What Can You Expect?
As a commodity trader, day trader or general investor, there are many factors to consider about how Covid-19 can affect your trades.
The first step is to identify which of your potential contracts are most directly affected by Covid-19. Identifying at-risk contracts helps you narrow down your concerns based on severity and actionability.
Next, reassess your contracts most at risk. Is the risk of these contracts contractually protected, and are you comfortable proceeding with the counterparty? If not, reconsider your options and negotiate based on the circumstances of the situation.
The pandemic is impeding economies and markets from functioning normally, creating cash flow issues that would otherwise not occur. Make sure that you have options available to you if a counterparty is at risk of insolvency. And, if you have to, consider what triggering an event of default clause entails and if it is your best option.
Covid-19 has particularly affected supply chains. If any of your contracts are at risk because of faults in the supply chain, you should have proper responses and procedures to deal with these weaknesses.
Manage Your Supply Chain Like A Pro
Keeping up with increased supply chain management hassles demanded by the pandemic can be daunting. Fortunately, some tools make keeping track and managing all this info trivial, leaving you time to deal with what matters.
With all-encompassing software like CommodityPro, assessing, implementing and continuing risk management has never been easier. CommodityPro offers an elegant solution to understanding, optimizing and tracking supply chains in one easy-to-use package.
The CommodityPro commodity trading and risk management (CTRM) platform make it simple for individuals, small businesses and enterprise-level firms to comprehensively manage inventory, track shipping costs, inspect supply and take care of taxes and import fees. Take your commodity trading to the next level and invest in your future with CommodityPro.
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