Commodities

Commodities are basic goods interchangeable between producers, such as grains, gold, beef, oil, and natural gas. As an asset class, they are highly speculative and are especially sensitive to economic shifts.

Frequently Asked Questions
  • What is a commodity?

    A commodity is a basic good that is interchangeable with other goods of the same type. They are often used as inputs in the production of other goods or services and while the quality of a given commodity may differ slightly, it is essentially uniform across producers.

  • What commodities do well in inflation?

    Commodities—precious metals, agriculture goods, and oil & gas—have often been positioned as hedges against inflation. However, commodities tend to respond to changes in the dollar's relative strength in international markets rather than domestic inflation pressures.

  • How do commodities markets work?

    Commodities work differently in spot markets and derivatives markets. In spot markets, the buyers and sellers exchange cash for immediate delivery of the commodity. In derivatives markets, the buyers and sellers exchange cash for the right to future delivery of that commodity. Derivatives holders will often roll over or close out their positions before delivery can happen since they aren’t necessarily looking to hold the commodity, but just speculate on its value.

  • What raw materials do auto manufacturers use?

    The automobile industry is one of the largest consumers of the world's raw materials. Some of the most common materials that industry relies on include aluminum, glass, and the iron ore to make steel, as well as petroleum products used to make plastics, rubber, and other special fibers.

Key Terms

Explore Commodities

Sand texture in the beach
Demand for Frac Sand and Concrete Drives Scarcity
Farmer sifting grain from one hand to the other in field as the sun sets
Federal Land Bank (FLB)
Young entrepreneur presenting project in exclusive boardroom.
Exchange of Futures for Physical (EFP)
What Raw Materials do Auto Manufacturers Use?
Commodity Research Bureau Index (CRBI): Definition and Weightings
Stacked gold bars
Has Gold Been a Good Investment Over the Long Term?
Managers talking about future plans and looking in document.
Timber Investment Management Organization (TIMO)
Graphic of globe and stock charts
Gross Processing Margin (GPM)
Business Agreement Handshake
What Are Cartels? How They Work, Examples, and Legality
A stack of British pound coins falling on list of share prices.
The Correlation of Commodities to Inflation
Close-Up Of Stock Market Data On Digital Display
Purchase And Sale Statement (P&S)
Hot briquetted iron (HBI) and iron ore pellets stand on display.
How the Iron Ore Market Works
Investment Theme Stockmarket and Finance Business Analysis Stockmarket With Digital Tablet
Natural Resource Investing
United States Natural Gas Fund (UNG)
Several oil pumps extracting oil from the ground
Proven Reserves
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Finding And Development (F&D)
Fungible goods examples: Dollars bills and No. 2 corn.
What Are Fungible Goods? Meaning, Examples, and How to Trade
Mineral Rights
Investment Farm
Commodity Paper
Posted Price Definition
Coin stacks and receding economy graphs.
How Risky Are Futures?
Oil derricks
Commodity Price Risk Definition
A group of colleagues spending time ia coffee shop analyzing investments.
What Commodities Are the Main Inputs for the Electronics Sector?
Person in worker uniform working on oil rig
Hotelling's Theory
Concept Pollution and industrialization . Details of oil pipelines with valves in large oil refineries, in sunrise time refining equipment, close-up of industrial pipelines of oil refineries.
Commodity ETF
Bird eye view of Surat Thani fly in the morning.
Common Resource
Stacks of gold bars
Hoarding
Top Agricultural Producing Countries
Crop Year
A doctor in scrubs holding an apple
Genetically Modified Food (GMF)
Wheat harvesting machine working in a wheat field.
S&P GSCI
Oil derrick in a Texas oil field
Farmout
Commoditization
Farm Credit System (FCS)
Federal Farm Credit System (FFCS)
Hardening
Bank for Cooperatives
Jamie L. Whitten Federal Building -- USDA Headquarters -- Washington, D.C., May 26, 2017
U.S. Department of Agriculture (USDA)
Tokyo Commodity Exchange (TOCOM)
Cropped hands using a tablet containing financial information in front of a monitor containing financial numbers
e-CBOT
Farm Price Index (FPI)
Wholesale Energy
Dow Jones Commodity Index (DJCI)
a wheat field
Exempt Commodity
Swiss Blue Topaz Necklace
Gemology
Commodity Credit Corporation (CCC)
Eligible Commercial Entity
Backpricing
Proved Reserves
Agroforestry
A man's hands hold iron pyrite, the original "fools gold"
Fool's Gold
The 4 Countries That Produce the Most Chocolate
How to Invest In Farming Without Owning a Farm
Who Produces the World's Food
Commodities That Move the Markets
Commodity Funds 101
Image of oil rigs
History of Oil Prices
Upstream vs. Downstream Oil and Gas Operations: What's the Difference?
Petrodollars: Definition, History, Uses

Commodities