What Is Commodity?
Commodity means anything that is bought and sold for money. The raw materials for industrial manufacturing, primary agricultural components for cultivation, produced goods and services, and even labor input all fall in this category.
Commodities have interchangeable value with other similar products. They are the essential goods changing hands in commerce or economics. They are often intermediate goods that are used to produce final products.
These are more often than not very similar in quality and nature, no matter which producer they come from. Still, it cannot be the same for consumer products, such as computer accessories, cosmetics, etc., since they differ significantly by brand.
More Thorough Understanding of the Term
The main difference between a commodity and a product is that a commodity is a raw material used to produce products. Commodities play an essential role in many industries and the global economy.
Where Are Commodities Traded?
The trading medium of commodities can be physical or financial. In the physical commodity market, the buying and selling involve actual physical commodities. On the other hand, in the financial commodity market, trading involves future contracts buying and selling or trading other financial instruments that are linked to commodities.
Commodity pricing varies on various factors, such as supply and demand, weather conditions, political events, speculation, and technological advancements. The commodity market is very volatile. Sudden changes in supply and demand can cause significant price fluctuations.
Types of Commodities
There are four types of significant commodities in commerce, and they are listed below -
1. Metals
These are raw materials and natural resources used in production for finished goods, such as silver, gold, copper, iron, etc.
2. Energy
Energy commodities are used as a source and supply of energy, including coal, crude oil, and natural gas.
3. Crops
These are agricultural commodities cultivated and harvested to meet food demand, animal feed, and other uses. Examples include rice, wheat, grain, corn, etc.)
4. Livestock and meat (eggs, beef, pork, etc.)
These commodities include domestic animals that are raised for food, such as eggs, cattle, chickens, etc.
Use of the Term in Sentences
- Advances in technology have given birth to new types of commodities in the market, such as bandwidth, website domain, etc.
- Foreign currencies, too, are included in the broader umbrella of commodities.
- Commodity prices are regulated by supply and demand and other products.
Webster Dictionary Meaning
- Commodity
- Convenience; accommodation; profit; benefit; advantage; interest; commodiousness.
- That which affords convenience, advantage, or profit, especially in commerce, including everything movable that is bought and sold (except animals), -- goods, wares, merchandise, the produce of land and manufactures, etc.
- A parcel or quantity of goods.