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Regardless of bull or bear markets, the industry has received a boost from the increased use of commodities. Traditionally used as a hedge against inflation, commodities have become a valuable diversification tool. Use of commodities has increased because of strong returns generated by speculators. These strong returns and diversification benefits have led to an increase in the use of commodities in pension funds and hedge funds. In addition, the introduction of commodity exchange-traded funds has helped industry revenue as another form of commission. For these reasons, industry research firm IBISWorld has added a report on the Commodity Dealing and Brokerage industry to its growing industry report collection.
Los Angeles, CA (PRWEB) August 07, 2012
Because the volume and volatility of the commodity markets drive the Commodity Dealing and Brokerage industry, the industry has been on a roller-coaster ride since 2005. The industry has experienced three distinct phases over the period: booming growth that led many commodities to hit historical highs, a crash in late 2008 as a result of the recession, and now, the beginnings of recovery. Despite its volatility, industry revenue is expected to increase an average of 4.0% annually to $17.5 billion over the five years to 2012, including a projected 5.4% increase in 2012. However, says IBISWorld industry analyst Doug Kelly, “this positive growth masks a great deal of volatility.” First, commodities like oil, gold, corn, wheat and steel surged between 2005 and late 2008. Due to rising prices, the volume of traded commodities rapidly increased, helping drive industry revenue. Next, these peak commodity prices came crashing down with the recession in late 2008 and early 2009. As a result, many investors adjusted their positions, which forced revenue down. In 2010, commodity trading and prices increased once more.
Regardless of bull or bear markets, the industry has received a boost from the increased use of commodities. Traditionally used as a hedge against inflation and future risk, commodities have become a valuable diversification tool. Use of commodities has also increased thanks to strong returns generated by speculators. These strong returns and diversification benefits have led to a rise in the use of commodities in pension funds and hedge funds. “In addition,” says Kelly, “the introduction of commodity exchange-traded funds (ETFs) has helped industry revenue as another form of commission and by opening up greater investor access to commodities.” The largest firms in the Commodity Dealing and Brokerage industry, including JPMorgan Chase & Co., Bank of America Corporation, Morgan Stanley and The Goldman Sachs Group Inc., combine to account for about half of the industry’s revenue.
In the five years to 2017, the industry will experience strong growth. Shaky investor confidence combined with low interest rates will stoke inflationary fears, which will increase commodity trading activity. Also, regulation will help the industry through 2017. Improved transparency and the use of central clearing will shore up the industry's position as a respectable branch of the financial services market. Given these conditions, revenue is expected to grow over the five years to 2017. For more information, visit IBISWorld’s Commodity Dealing and Brokerage in the US industry report page.
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IBISWorld industry Report Key Topics
The industry includes companies and individuals that act as brokers and dealers in the commodities market. Brokers are individuals who trade commodities futures on the behalf of clients, while dealers trade for their own accounts. Commodity futures are contracts to buy a predetermined good at a specific price and date in the future. Steel, corn, wheat, oil and gold are examples of commodities on which future contracts can be written.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.
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