Glossary

102 terms used across the site, each defined in one line here and explained on its own page.

A B C D E F G H I J L M N O P Q R S T V W

Alumina: Alumina is refined aluminum oxide, produced from bauxite, that is smelted using large amounts of electricity to make metallic aluminum.
API gravity: API gravity is a scale from the American Petroleum Institute that measures how light or heavy a crude oil is relative to water, a higher number meaning a lighter oil.
Arabica: Arabica is the coffee species grown at higher altitudes that accounts for most of the world's premium coffee and the main futures contract traded in New York.
Arbitrage: Arbitrage is the practice of buying a commodity in one market, form, or time period and selling it in another to profit from a price gap, with little risk.
Assay: An assay is a laboratory test that measures the exact metal or mineral content of an ore, concentrate, or bullion sample, used to determine grade and settle payment.
BACI: BACI is a harmonized international trade database built from UN Comtrade records, reconciling the mismatches between what exporters report shipping and what importers report receiving.
Backwardation: Backwardation is a market state in which the spot price or nearby futures price is higher than the price for later delivery.
Baltic Dry Index: The Baltic Dry Index is a daily assessment of charter rates for dry bulk ships carrying iron ore, coal, and grain, used as a gauge of shipping demand.
Barrel: A barrel is the standard volume unit for crude oil and refined products, equal to 42 US gallons, used in pricing and production statistics worldwide.
Basis: Basis is the difference between the local cash price of a commodity and the price of the related futures contract, usually quoted as cash minus futures.
Bauxite: Bauxite is the reddish ore mined and refined into alumina, the raw material that is then smelted into aluminum.
Benchmark: A benchmark is a widely quoted reference price for a commodity, tied to a specific grade and location, that other transactions are priced against.
Bushel: A bushel is a volume-based unit used to price and measure US grain and oilseed crops, with a standard weight that differs by crop.
Carryover: Carryover is the portion of a crop's ending stocks that rolls into the next marketing year as its opening supply, linking one year's harvest to the next.
Cartel: A cartel is a group of producers that coordinates output, prices, or exports to influence a market in its members' collective favor, rather than competing independently.
Cash settlement: Cash settlement is a way of closing a futures contract at expiry by paying the difference between the contract price and a reference price in cash, no commodity changing hands.
Cathode: Cathode is refined metal, most often copper, cast into flat sheets of high purity that meet an exchange's delivery standard and can be sold directly into manufacturing.
Certified stocks: Certified stocks are the quantity of a commodity held in exchange-approved warehouses that has been inspected and graded as deliverable against a futures contract.
Chokepoint: A chokepoint is a narrow shipping route, such as a strait or canal, through which a large share of a commodity's seaborne trade must pass.
CIF: CIF (cost, insurance and freight) is a trade term under which the seller's price includes the goods, marine insurance, and freight to the named destination port.
Clearing house: A clearing house is the entity that stands between every buyer and seller in a futures market, guaranteeing each trade and requiring both sides to post margin.
Comtrade: Comtrade is the United Nations' public database of country-level import and export statistics, reported by customs authorities under the Harmonized System.
Concentrate: Concentrate is ore that has been crushed and processed at a mine to raise the share of valuable metal before it is shipped to a smelter for further processing.
Contango: Contango is a market state in which futures prices for later delivery are higher than the spot price or the price of nearer delivery.
Cost and freight: Cost and freight (CFR) is a trade term under which the seller pays for the goods and the freight to the destination port, while the buyer bears the insurance.
Cotlook A Index: The Cotlook A Index is a daily average of the cheapest cotton offers from the world's main exporting origins, widely used as the reference price for physical cotton trade.
Critical mineral: A critical mineral is a raw material a government has designated as essential to its economy or security and vulnerable to a supply disruption.
Crush margin: The crush margin is the difference between the value of the oil and meal produced from crushing an oilseed and the cost of the oilseed itself.
Dated Brent: Dated Brent is a daily price assessment for physical North Sea crude oil cargoes loading in the near term, used as a reference for pricing traded crude.
Deflator: A deflator is an index used to convert a price recorded in one year's money into a chosen base year's money, removing the effect of general inflation.
Delivery month: The delivery month is the calendar month specified in a futures contract during which the physical commodity must be delivered if the contract is not closed out beforehand.
Demurrage: Demurrage is a fee a shipper pays to a vessel owner for time a ship spends waiting to load or unload beyond the time allowed in the charter.
Differential: A differential is the price gap between a specific commodity grade or delivery point and the benchmark it is quoted against, stated as a premium or a discount.
Dry metric tonne: A dry metric tonne is a unit used in mineral concentrate contracts equal to one tonne of material after its moisture has been removed.
Dutch disease: Dutch disease is the pattern in which a commodity export boom pushes up a country's currency and wages, making its other export industries less competitive.
El Nino: El Nino is a periodic warming of surface waters in the central and eastern Pacific Ocean that shifts rainfall and temperature patterns across major growing regions worldwide.
Embargo: An embargo is a government order that halts all trade with a specified country, broader than a targeted sanction and usually covering every commodity, not a single sector.
Ending stocks: Ending stocks are the quantity of a crop left unsold and unused at the close of its marketing year, carried forward as the starting inventory for the next one.
Exchange warehouse: An exchange warehouse is a storage facility approved by a futures exchange to hold a commodity that can be delivered against a contract, subject to the exchange's rules.
Expiry: Expiry is the date on which a futures contract stops trading and open positions must be settled, either by delivery of the commodity or by cash payment.
Export ban: An export ban is a government order that stops some or all shipments of a commodity out of the country, usually to protect domestic supply or curb domestic prices.
FAOSTAT: FAOSTAT is the United Nations Food and Agriculture Organization's public database of country-level agricultural production, trade, and consumption statistics going back decades.
FOB: FOB (free on board) is a trade term under which the seller's price includes delivery of goods onto the ship at the loading port, freight paid by the buyer.
Forward curve: The forward curve is the set of prices for a commodity's futures contracts across all traded delivery months, plotted from nearest to furthest.
Freight rate: The freight rate is the cost of shipping a commodity by sea, quoted per tonne or as a day rate for chartering a vessel.
Front month: The front month is the futures contract with the nearest delivery date still being actively traded, and its price is usually what news reports quote as a commodity's price.
Futures contract: A futures contract is a standardized, exchange-traded agreement to buy or sell a fixed quantity of a commodity at a set price on a future date.
Grade: Grade is the specific quality standard a commodity lot must meet, covering factors like purity, size, moisture, or protein, that determines which price it can be sold against.
Hedging: Hedging is using a futures or other derivative position to offset the risk of an adverse price move in a commodity a person already holds or plans to trade.
Henry Hub: Henry Hub is a natural gas pipeline junction in Louisiana whose price serves as the main benchmark for natural gas traded in the United States.
HS code: An HS code is a numeric product classification from the Harmonized System, maintained by the World Customs Organization, used by customs authorities and trade statisticians worldwide.
Incoterms: Incoterms are standardized trade terms published by the International Chamber of Commerce that define who pays for transport and insurance and where risk passes.
JKM: JKM (Japan Korea Marker) is a price benchmark for LNG cargoes delivered to Northeast Asia, covering the region's biggest LNG importers, Japan and South Korea.
La Nina: La Nina is the cooling phase of the same Pacific Ocean cycle as El Nino, and it tends to push weather patterns for major crops in the opposite direction.
Letter of credit: A letter of credit is a bank's promise to pay a seller once shipping documents proving a cargo was loaded and meets contract terms are presented, reducing payment risk.
LNG: LNG (liquefied natural gas) is natural gas cooled into a liquid so it can be shipped by tanker to markets a pipeline cannot reach, then turned back into gas.
Margin call: A margin call is a demand from a broker or clearing house for a futures trader to deposit more cash after a losing position has eroded the collateral on account.
Marketing year: A marketing year is the twelve-month accounting period, usually starting at harvest, over which a crop's supply, use, and stocks are measured.
Mine production: Mine production is the quantity of ore or metal extracted directly from mines, measured before any smelting or refining, and distinct from the refined metal that reaches end users.
MMBtu: An MMBtu (million British thermal units) is the standard unit used to price and measure natural gas and LNG in North American and internationally quoted markets.
Moisture content: Moisture content is the share of water in a harvested grain or bean, and it must fall within a set range for the lot to meet delivery grade.
Nominal price: A nominal price is a commodity price expressed in the currency units of the year it was recorded, with no adjustment for inflation.
Offtake agreement: An offtake agreement is a long-term contract in which a buyer agrees in advance to purchase a fixed share of a mine's or plant's future output.
OPEC+: OPEC+ is a coordinating group of oil-exporting countries, combining the original OPEC members with Russia and other producers, that sets production targets to influence the global oil price.
Open interest: Open interest is the total number of futures or options contracts in a market that have not yet been closed, offset, or delivered.
Ore grade: Ore grade is the concentration of a valuable metal within mined rock, usually stated as a percentage or in grams per tonne, and it determines processing volume needed.
Physical delivery: Physical delivery is the transfer of the actual commodity from a futures seller to a futures buyer to satisfy a contract that has reached expiry.
Pig iron: Pig iron is crude iron produced by smelting iron ore in a blast furnace, the intermediate step between mined ore and finished steel.
Premium: A premium is an amount added to a benchmark or base price to reflect better quality, location, timing, or scarcity of a specific commodity lot.
Price cap: A price cap is a government-set ceiling on what buyers may pay for a commodity from a specific seller, intended to limit that seller's revenue without stopping the trade.
Producer price: Producer price is the amount a farmer, mine, or well operator receives for a commodity before it is processed, transported, or marked up by intermediaries.
PSD: PSD (Production, Supply and Distribution) is a USDA database of country-level output, trade, consumption, and stocks for agricultural commodities, the data behind reports like WASDE.
Quota: A quota is a government or cartel-set limit on the quantity of a commodity that may be produced, exported, or imported over a given period.
Real price: A real price is a commodity price adjusted for inflation using a deflator, so that values from different years can be compared in constant purchasing power.
Refined production: Refined production is the quantity of a metal that has completed smelting and refining into a pure, deliverable form, distinct from a country's own mine production.
Refining: Refining is the industrial process that upgrades a raw commodity, such as crude oil or mined metal, into a purer or more usable product like gasoline or refined copper.
Reserves: Reserves are the quantity of a mineral or fuel that geological and economic studies show can be profitably extracted with current technology and prices.
Resource curse: The resource curse is the observation that some countries rich in oil, gas, or minerals grow more slowly and have weaker institutions than resource-poor peers.
Robusta: Robusta is the hardier, higher-caffeine coffee species grown at lower altitudes, used heavily in instant coffee and blends, and traded on its own futures contract.
Roll yield: Roll yield is the gain or loss an investor holding futures earns from replacing an expiring contract with the next one, arising from the shape of the forward curve.
Royalty: A royalty is a payment a mining or oil company makes to a government or landowner for the right to extract a resource, based on production value or volume.
Sanction: A sanction is a government restriction that blocks trade, finance, or shipping with a targeted country, company, or individual, often applied to commodity exports as economic pressure.
Settlement: Settlement is the process of closing out a futures position, either by delivering the physical commodity or by exchanging cash against a final reference price.
Smelting: Smelting is the high-temperature process that extracts metal from ore or concentrate by separating it from the rock and other elements it is bound to.
Sour crude: Sour crude is crude oil with high sulfur content, which needs more refining to remove impurities and therefore usually trades at a discount to sweeter grades.
Speculator: A speculator is a futures market participant who takes on price risk in pursuit of profit, without an underlying physical position to hedge.
Spot cargo: A spot cargo is a single shipment of a commodity, such as a tanker load of crude oil or LNG, sold for near-term delivery outside a long-term supply contract.
Spot price: The spot price is the price paid for a commodity delivered and settled immediately, or within the market's normal short delivery window, rather than at a future date.
Stocks-to-use ratio: The stocks-to-use ratio is a commodity's ending inventory divided by its total consumption for the same period, expressed as a percentage or in weeks of supply.
Strategic petroleum reserve: A strategic petroleum reserve is government-held crude oil stockpiled for release during a supply emergency, intended to cushion prices and buy time rather than serve as a trading tool.
Sulfur content: Sulfur content is the share of sulfur in a crude oil or fuel, and it determines how much a refiner must remove before the fuel can be sold.
Supercycle: A supercycle is a prolonged, multi-year period in which a broad range of commodity prices rises together, driven by a structural shift in demand or supply.
Sweet crude: Sweet crude is crude oil with low sulfur content, which costs less to refine into clean fuels and therefore usually trades at a premium to sourer grades.
Tanker: A tanker is a ship built to carry liquid cargo in bulk, such as crude oil, refined fuel, or LNG, in dedicated tanks rather than containers or dry holds.
Tariff: A tariff is a tax a government charges on a commodity as it crosses its border, usually on imports, that raises the price paid inside that market.
Terms of trade: Terms of trade is the ratio of a country's export prices to its import prices, and it rises when exports get relatively more expensive or imports relatively cheaper.
Treatment charge: A treatment charge is the fee a smelter deducts from the price it pays a mine for concentrate, covering the cost of processing it into refined metal.
Troy ounce: A troy ounce is the standard weight unit for precious metals, equal to 31.1035 grams, heavier than the ordinary avoirdupois ounce used for most other goods.
TTF: TTF (Title Transfer Facility) is a virtual natural gas trading point in the Netherlands whose price is the main benchmark for natural gas traded in Europe.
VLCC: A VLCC (very large crude carrier) is a tanker built to carry a large cargo of crude oil, among the biggest vessels used in the oil trade.
WASDE: WASDE (World Agricultural Supply and Demand Estimates) is a monthly USDA report forecasting production, use, and ending stocks for major crops in the United States and worldwide.
WTI: WTI (West Texas Intermediate) is a light, sweet crude oil benchmark priced at Cushing, Oklahoma, and the main reference for crude oil traded in the United States.