What is the primary role of physical commodity traders?

The primary role of physical commodity traders is to buy commodities from producers and sell them to counterparties. This function is essential to the commodities market, as these traders act as intermediaries who ensure that the flow of physical goods occurs smoothly from producers to end users or other stakeholders in the supply chain.

These traders not only bridge the gap between the supply and demand of physical commodities, but they also manage logistics, negotiate prices, and often take ownership of the commodities during the transaction. This hands-on approach allows them to leverage market knowledge, manage risks associated with price fluctuations, and fulfill timely delivery requirements, which are crucial in physical commodity trading.

While options like selling directly to consumers or trading in derivatives capture different aspects of commodities in the market, they do not encompass the primary function of physical traders, who focus specifically on the movement and exchange of tangible goods rather than financial instruments or consumer transactions.