What is Commodity Broker? Definition and Example

What is Commodity Broker?

Commodity broker is an individual or company that works for private clients when it comes to buying and selling commodities. Besides working for private clients, commodity brokers can work for commercial clients as well. The main job of the brokers is buying and selling goods. They can be the literal goods, including common commodities like oil, sugar, and flour.

However, the goods to be handled by a commodity brokers can also in the form of virtual product. This happens a lot in Forex or trading business. The virtual products are mostly related to financial stuff, including stocks, asset papers, shares, bonds, and many more. The goal of a commodity brokers is to buy and sell as many goods as possible from one client to another in order to get profits and financial return.

Commodity Broker Definition

In addition, when it comes to the definition of commodity broker, the answer will be someone working to buy and sell goods on behalf of their clients, which can be an individual or a company. The brokers make the client does not have to negotiate and deal with the paperwork of the buy and sell stuff. Therefore, client just has to leave everything to the brokers, and they will get it all done.

What Does a Commodity Broker Do? Example

The basic job is of course trading on behalf of the clients they represent. Besides, the brokers will also have to monitor the performance of general market related to goods they sell, buy, and trade. Since the brokers are expected to be experts, they will also have to provide advice as well as the recommendation of market to their clients.

The job of a commodity broker does not end there. They still have to do the general act on trading and buy-and-sell. It is including getting involved in price negotiation, meeting regularly with clients, getting supplies, and making market reports. The job is not easy at all. That's why they get paid well, actually.

The example of the work of the commodity brokers is when a newly established bread making factory is looking for a large amount of flour for their production. Since they are new, they do not have any affiliation to flour supplier. Instead of searching for the supplier and make a deal on their own, they use the service of a commodity brokers to seal the deal.

Also read "What is Auto Transport Broker? Definition and Example".