FREE Guide - 5 Chart Patterns You Need to Know!

Commodity Paper

What does Commodity Paper mean?

An instrument representing a loan secured by commodities. Commodity paper is a special type of loan or advance where commodities serve as a collateral. The documents, such as bills of lading, or warehouse receipts, showing ownership over commodities are deposited with the lender. 

Futures Knowledge Explains Commodity Paper

The lender has a lien over the commodity, but physical possession of the commodities remain with the borrower. For example, banks provide working capital loan on a commodity paper to a farmer who has 50,000 bushels of wheat in his inventory. The farmer can get a loan against the food grains to continue farm operations, or in some instances use the loan as speculation to wait for a better price (sell the wheat at a higher price, payoff the loan, and keep the net proceeds).

Get Your FREE Technical Analysis Guide!
Timing is everything, and with this guide, you'll learn how technical analysis can help find the right time to enter and exit your futures trades. Nearly 30 explanations and examples of the most popular technical analysis tools are all in this one handy guide. It's like having a futures trading mentor at your side!