The Impact of Risk Management on Commodity Pricing and Modeling – A Case Study of Wheat

Commodities are subject to various risks. There is a seasonal factor, storage risks, supply and demand for the commodity. Commodities are frequently traded in financial markets and can be traded immediately or their derivatives traded in the financial market. The most common types of traded commodities are agricultural commodities, metals, and energy products. Market risk management is common in most companies around the world, but the focus is usually around risk management of price risks, quantity risks, cost risks, and regulatory risks. In order to model commodity prices, descriptive analysis was used to estimate future commodity prices, and the components can be combined with criteria of central tendency and their relationship with time. The research found that risk management of all types - prices, quantity, cost, and regulation - has a significant impact on determining the price of wheat in commodity markets, and it has an impact on the time frame.