Reading Price Quotations
As futures prices rise, some people are being confused by the prices being quoted in the news media. And as more people flock to the “hard assets” that commodities represent, it is becoming more important to understand how to read the prices quoted for the various commodities.
Grains are generally quoted in cents per bushel. Wheat, for example, might be quoted as 1153.00. This is 1153 cents per bushel or $11.53 per bushel. At this price, a contract with 5,000 bushels has a total contract value of $57,650.00. Rice, however, is quoted in cents per hundredweight (cwt.). A quote of 1827.00 is $18.27 per cwt. With a price of $18.27 per cwt., and a contract size of 2,000 cwt., one contract is valued at $36,540.00.
Meats are generally quoted in cents per pound or dollars per hundredweight (cwt.). For example, live cattle could be quoted as 94.575 cents per pound. This is the same as $94.575 per cwt. The contract size is 40,000 pounds (or 400 cwt.). Thus, the total contract value at this price is $37,830.00.
For food and fiber contracts (coffee, sugar, cocoa, cotton, orange juice) contracts are generally quoted in cents per pound; for example, sugar, with a price of 14.36 cents per pound ($0.1436/lb.) and a contract size of 112,000 pounds has a total contract value of $16,072.00. Soybean oil is also quoted in cents per pound. Cocoa, however, is quoted in dollars per ton. With a price of 2,743 per ton and a contract size of 10 metric tons, the total value of one contract is $27,430.00. Soybean meal is also quoted in dollars per ton.
Lumber is quoted in dollars per thousand board feet with 110,000 board feet per contract. A quote of 206.20 has a total contract value of $22,682.00.
Energy futures contracts are quoted in several different ways: Crude oil is quoted in dollars per barrel (42 gallons per bbl.), Gasoline, heating oil, and ethanol are quoted in dollars per gallon. Natural gas is quoted in dollars per MMBtu (millions of British Thermal Units). Crude oil, quoted at 102.35, is $102.35 per bbl. The total contract value for a contract with 1,000 bbls. is $102,350.00. With gasoline at 2.6681 dollars per gallon, one 42,000 gallon contract is worth $112,056.00. If natural gas is priced at 9.353 dollars per MMBtu and 10,000MMBtus per contract, the value of one contract is $93,530.00.
Some metals contracts are cents per pound, while others are cents per troy ounce or dollars per troy ounce. Copper is cents per pound. At 382.70, this is $3.827 per pound. One contract contains 25,000 pounds, bringing the total contract value to $95,675.00. Silver is quoted in cents per troy ounce. A quote of 2036.0 is $20.36 per troy ounce. For a contract size of 5,000 troy ounces, the total contract value is $101,800.00. Gold, platinum, and palladium are traded in dollars per troy ounce. A gold quote of 984.50 is dollars per troy ounce. A 100 ounce contract is worth $98,450.00.
Currency futures are quoted in U.S. dollars per one, ten, or one hundred foreign currency units. The Japanese Yen (¥) is quoted at .9705. Because yen are quoted dollars per hundred yen, .9705 is $0.009705 per yen. This is almost one U.S. cent! Japanese Yen contracts have ¥12,500,000, bringing the total value of one contract at .9705 to $121,312.50. The Mexican Peso (MXN) is traded in dollars per ten MXN. A quote of .93100 is $.0931 per MXN. Because MXN contracts have 500,000 pesos, a contract at .93100 has a total value of $46,550.00. The rest of the currency futures contracts are quoted in dollars per one foreign currency unit. The Euro (€) quoted at 1.5202 and containing €125,000 per contract, has a value of $190,025.00.
Index contracts use different multipliers times the index. The index is what’s quoted in the media. Some indices are quoted with decimal places and others are not. The Dow Jones Industrial Average® (DJIA®) uses a multiplier of $10.00 times the index. A quote for the DJIA® of 12222 gives a total contract value of $122,220.00. The S&P 500 Index® is quoted at $250 times the index. A quote of 1327.00 has a total contract value of $331,750.00. The U.S. Dollar Index is quoted $1,000.00 times the index making a quote of 73.74 worth $73,740.00 for one contract.
Interest rate futures use short-term, medium-term, or long-term instruments. Short-term instruments, such as Eurodollar and 1-month LIBOR are quoted in points (.01 of 1%) of 100%, shown to four decimal places. A Eurodollar (short for Eurodollar Time Deposit) quote of 97.1275 is trading at 97.1275% of par. Par is 100.00%. Implied in this quote is a 90-day interest rate of 2.8725% (100.0000% – 97.1275% = 2.8725%). Because the maturity is less than one year and the instrument is a discount instrument (interest is not paid by “clipping coupons” but rather the purchaser pays a price discounted by the interest to be received and receives the face value, or 100.00% of par, at maturity in 90 days), there is a rather complex method for calculating contract value: 100.0000 – 97.1275 = 2.8725% interest rate; move decimal 2 places to the right, 287.25 x $25.00 (the value of each point or .01% over the 90-day period) = $7,181.25 value of the discount from par over a period of 90 days). $1,000,000 face (par) value of one contract – $7,181.25 discount = $992,818.80 value of one contract.
The medium- and long-term instruments are quoted in percents and thirty-seconds of 100%. A price quoted as 118-185 is the same as 118 and 18½/32nds. Specifically, the quotes understand a decimal point before the final digit, so 118-185 is understood to mean 118-18.5, or 118-18½. If the price climbs from 118-185 to 119-210, there has been an increase of 1 and 2½/32nds. Another way to think of 32nds is: 115-000 equals 114-320. The value of 1/32 can be computed by multiplying the $100,000 face value of the contract by 1% and dividing the result by 32, or by multiplying 1/32 of 1% by $100,000. This comes to $31.25 per 1/32. Thus, the total contract value for a contract quoted at 118-185 is $118,578.13 (118 x $1,000 + 18.5 x $31.25 = $118,578.125 rounded to $118,578.13).
The futures industry is an important industry. It affects the lives of millions of people, although they may not be aware of its existence. It touches the food they eat, the clothes they wear, and the material that gives them shelter, as well as their finances and investments. Whether futures trading is for you or not, you will at least be able to follow commodity prices as they become more prevalent in today’s market news. By understanding how to read commodity price quotes, you can better understand the world of futures, and start tracking commodity prices as a means of learning about relative values in an ever changing world.
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