Commodity Derivatives

Subtype

No asset of this subtype is currently listed on the Regen Atlas.

Definition: Commodity derivatives derive from tangible goods such as agricultural products, metals, or energy resources.

Description

Commodity derivatives are financial instruments derived from commodities, such as agricultural products (e.g. wheat, corn, soybeans), metals (e.g. gold, silver), and energy resources (e.g. crude oil). Their price dynamics are influenced by various factors, including industrial supply and demand, geopolitical events, investor speculation, and, as exemplified below by the case study of coffee futures, climate conditions.

Example

As far as we are aware, no tokenized commodity derivatives exist at present. However, it is possible to speculate about one, such as a tokenized coffee future.

Coffee futures are financial derivatives based on the future price of coffee beans, allowing growers, distributors, and investors to hedge against price volatility caused by climatic risks such as droughts or frosts. While futures help mitigate financial risk and stabilize supply chains, they also contribute to market manipulation and mispricing, often benefiting intermediaries over producers. Web3 technologies, with transparent pricing mechanisms and decentralized market structures, offer a potential solution by enabling farmers to directly lock in prices and potentially establish multiple fairer reference prices based on the quality and sustainability of their coffee.