Gross Processing Margin - GPM

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. Commodity Market

    A physical or virtual marketplace for buying, selling and trading ...
  4. Raw Materials

    A material or substance used in the primary production or manufacturing ...
  5. Supply Curve

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

    1. A basic good used in commerce that is interchangeable with ...
Related Articles
  1. Options & Futures

    Commodities: Soybeans

    By Noble DrakolnFirst introduced in Europe in the 1700s, the soybean has become one of the most important beans in the world, securing a place for itself by providing oil and protein around the ...
  2. Economics

    How Does a Company Use Raw Materials?

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

    How To Invest In Commodities

    Find out which futures, options or funds will be your perfect commodity portfolio fit.
  4. Mutual Funds & ETFs

    Commodity Funds 101

    These funds make investing in gold, oil or grain an easier prospect.
  5. Options & Futures

    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 ...
  6. Options & Futures

    How to Use Commodity Futures to Hedge

    Both producers and consumers of commodities can use futures to hedge. We explain, using a few examples, how to achieve commodity hedging with futures.
  7. Options & Futures

    All About Liquid Commodities

    You might hear 'liquid commodities' and think of an auction, but they're actually a high-volume, fast paced financial product suitable for day traders.
  8. Investing

    The Countries Affected By Falling Commodity Prices

    Weaker Chinese demand is helping to drive down commodity prices, which has significant effects on the global economy.
  9. Investing Basics

    The Importance of Commodity Pricing in Understanding Inflation

    Commodity prices are believed to be a leading indicator of inflation, but does it always hold?
  10. Entrepreneurship

    How Gross Margin Can Make or Break Your Startup

    Find out how your startup's gross margin can impact your business, including why a mediocre margin may spell disaster for a budding business.
RELATED FAQS
  1. 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 >>
  2. Do hedge funds invest in commodities?

    Learn about hedge funds that invest in commodities. Read about Commodity Trading Advisors who focus specifically on trading ... Read Answer >>
  3. What is the difference between operating margin and gross margin?

    Discover the main differences between operating margin and gross margin, and how investors and analysts interpret each differently. Read Answer >>
  4. How are commodity spot prices different than futures prices?

    Find out more about commodity spot and futures prices, how to calculate a commodity's futures price, and the differences ... Read Answer >>
  5. Which of the following would be considered a short hedge ...

    The correct answer is a) Long the commodity and short the futures Read Answer >>
  6. What are the differences between gross profit and gross margin?

    Learn how gross profit and gross margin are calculated and how each is used in fundamental analysis. Generally, these numbers ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center