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

Cost Depletion
Cost Depletion Definition
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Full Cost (FC) Method
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Commodity Investing: Top Technical Indicators
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The World's 6 Biggest Corn Producers
Delfshaven, Rotterdam, Netherlands, Europe
Resource Curse Definition
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Intercontinental Exchange (ICE): What It Is and What It Does
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What Is a Commodities Exchange? How It Works and Types
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Dry Bulk Commodity: Definition, Examples, Index, Vs. Container
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Warehouse Financing: Definition, Example, Vs. Warehouse Lending
Harvest
Crop Yield Definition, Formula, Statistics
How Gas Prices Affect the Economy
5 Things to Know About Potash
Agricultural Credit
Agricultural Credit: Definition and Types of Credit Vehicles
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The Chicago Board of Trade (CBOT): What Trades on This Exchange
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Trillion Cubic Feet (Tcf)
Top Coffee ETFs (JO, CAFE)
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Spark Spread: Definition, Uses, Calculation Formula
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Federal Land Bank (FLB)
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Exchange of Futures for Physical (EFP): Definition and Example
Commodity-Backed Bond
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Reclamation
Agricultural Sector Investment Program (ASIP)
Carrying Charge Market
Agflation
Commodity Pairs: Currency Correlations Explained
Yen and yuan currency symbol
Private Currency
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Corn-Hog Ratio
Delivery Instrument
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Natural Gas ETF
Potash
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Top 3 Commodities Mutual Funds
International Commodities Clearing House (ICCH)
What Raw Materials do Auto Manufacturers Use?
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Association of Futures Brokers and Dealers (AFBD)
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Terminal Elevator
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)
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Gross Processing Margin (GPM)
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What Is a Cartel? Definition, Examples, and Legality
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The Correlation of Commodities to Inflation
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Purchase And Sale Statement (P&S)
Hot briquetted iron (HBI) and iron ore pellets stand on display.
How the Iron Ore Market Works
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Natural Resource Investing
United States Natural Gas Fund (UNG)
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Proven Reserves
Through Bill of Lading
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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
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How Risky Are Futures?
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Commodity Price Risk: Definition, Calculation, and Main Risks
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What Commodities Are the Main Inputs for the Electronics Sector?

Commodities