It doesn’t refer to just any old product you might buy at a store. Instead, a commodity is a basic good, typically raw materials or agricultural products, that are:
- Fungible
This means individual units of the commodity are essentially interchangeable. A bushel of wheat from one farm is generally considered the same as a bushel of wheat from another, as long as they meet the same quality standards.
- Traded on Public Exchanges
Commodities are often bought and sold in bulk on specialized marketplaces, allowing for price fluctuations based on supply and demand.
- Standardized
Many commodities adhere to specific quality grades or classifications, ensuring a level of consistency for buyers.
Commodities are typically raw materials or agricultural products that serve as building blocks for other goods. Examples include:
- Agricultural Products – wheat, corn, soybeans, cotton, coffee, cocoa, sugar
- Energy Products – crude oil, natural gas, gasoline
- Metals – gold, silver, copper, iron ore
- Industrial Materials – rubber, lumber, plastics