Glossary

Definitions were accessed from Investopedia.com and the AMAP BDS Knowledge and Practice Task Order Lexicon.

A commodities exchange is an entity, usually an incorporated non-profit association,that determines and enforces rules and procedures for the trading of commodities and related investments, such as commodity futures. Commodities exchange also refers to the physical center where trading takes place.

A commodity futures contract is an agreement to buy or sell a set amount of a commodity at a predetermined price and date. Buyers use these to avoid the risks associated with the price fluctuations of the product or raw material, while sellers try to lock in a price for their products. Like in all financial markets, others use such contracts to gamble on price movements.

Distress sales are urgent sales of assets because of negative conditions and, sometimes, at a significantly reduced price.

Futures trading is buying or selling a particular commodity or financial instrument at a pre-determined price in the future. Futures contracts detail the quality and quantity of the underlying asset and are standardized to facilitate trading on a futures exchange.

Household income smoothing is the process of stabilizing household income at pre-determined intervals to ensure that a consistent supply of income is present for household needs.

The Indian Public Distribution System (PDS) is a national food security system that distributes subsidized food to India’s poor. Major commodities distributed include wheat, rice, sugar and kerosene.

Microenterprises are small businesses that employ a small number of employees. A microenterprise will usually operate with fewer than 10 people and is started with a small amount of capital. Most microenterprises specialize in providing goods or services for their local areas.

The price discovery process (also called price discovery mechanism) is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers. Price discovery mechanism here refers to awareness about the prices prevailing in the market and the factors that determine the prices of the commodities.

A post-harvest value chain is the part of the value chain that occurs after harvest of an agricultural product has taken place and includes the activities related to getting the product to a market and in the hands of a consumer.

Spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate (spot) settlement (payment and delivery). Spot settlement is normally one or two business days from trade date through spot exchanges.

A value chain encompasses the full range of activities that are required to bring a product from its conception to its end use. These include design, production, marketing, distribution and support to get the product to the final consumer. The activities that comprise a value chain can be contained within a single firm or many firms.

A warehouse receipt is a document that provides proof of ownership of commodities (e.g., bags of wheat, paddy, coffee, etc.) that are stored in a warehouse, vault or depository for safekeeping. Warehouse receipts may be negotiable or non-negotiable. Negotiable warehouse receipts allow transfer of ownership of that commodity without having to deliver the physical commodity.

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