DEFINITION of 'Gross Processing Margin - GPM'

The difference between the cost of a raw commodity and the income it generates once sold as a finished product. Gross processing margins (GPM) are affected by supply and demand. Because the prices for raw commodities and their processed versions fluctuate, investors are able to trade futures based on their expectations about changes in GPMs.

BREAKING DOWN 'Gross Processing Margin - GPM'

For some commodities, such as soybeans, the GPM changes seasonally as supply and demand rise and fall. Also, GPM may go by a different name depending on the commodity it is describing. For example, the GPM for oil is called the crack spread; for soybeans, it's called the crush spread (because soybeans are crushed to produce oil and meal).

RELATED TERMS
  1. Crush Spread

    A trading strategy used in the soybean futures market. A soybean ...
  2. Commodity Price Risk

    The threat that a change in the price of a production input will ...
  3. Raw Materials

    A material or substance used in the primary production or manufacturing ...
  4. Commodity Market

    A physical or virtual marketplace for buying, selling and trading ...
  5. Supply Curve

    The supply curve is a graphical representation of the relationship ...
  6. Intercommodity Spread

    Going long on one futures market in a given delivery month and ...
Related Articles
  1. Investing

    How Does a Company Use Raw Materials?

    Raw materials are the basic components of a finished product.
  2. Investing

    Understanding the Commodity Market

    There are currently 50 physical and virtual commodity markets worldwide where almost 100 primary commodities trade through the exchange of ownership rights.
  3. Financial Advisor

    When Will it Be Safe to Buy Commodities?

    When will it be safe to buy commodities (and which ones)? A closer look at the commodities markets and how they move.
  4. Investing

    The Role Of Speculators In The Commodity Market

    Contrary to popular belief, speculators are important for the market. Find out exactly what they do.
  5. Investing

    How To Invest In Commodities

    Find out which futures, options or funds will be your perfect commodity portfolio fit.
  6. Investing

    Commodity Funds 101

    These funds make investing in gold, oil or grain an easier prospect.
  7. Managing Wealth

    Commodities Relative Value

    In this special report, we take a close look at the hedge fund segment, considering key characteristics and performance trends, and offering our outlook for the rest of the year and beyond.
  8. Investing

    The Value of Profitability Ratios

    How is a company being run? Is it generating profits? The answer to these questions lies in analyzing the profitability ratios of a company.
  9. Financial Advisor

    An Overview Of Commodities Trading

    Commodities markets, both historically and in modern times, have had tremendous economic impact on nations and people. Investing in commodities can quickly degenerate into gambling or speculation ...
  10. Investing

    Commodities: The Portfolio Hedge

    These diverse asset classes can provide downside protection and upside potential. Find out how to use them.
RELATED FAQS
  1. Who sets the price of commodities?

    Commodities are extremely important as they are essential factors in the production of other goods. A wide of array of commodities ... Read Answer >>
  2. On which financial statement does a company list its raw material costs?

    Discover what items are raw materials, how raw material costs affect businesses, and where these costs are recorded on a ... Read Answer >>
  3. How do I learn technical skills for trading commodities?

    Learn what resources are available to learn about trading commodities, and understand some of the differences between stocks ... Read Answer >>
  4. Can commodities also be investments?

    Learn about the commodities trade and several different ways investors may participate. Find out about some of the advantages ... Read Answer >>
  5. Can mutual funds invest in commodities?

    Learn how investors can use commodity mutual funds to diversify their portfolios, and discover why mutual funds may be less ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center