What are Commodities? – Start Here
March 12, 2016
A commodity is “a raw material or primary product that can be bought and sold, such as copper or coffee” according to the Oxford English dictionary. Just remember this; it is a raw material.
Wikipedia has a more elaborated definition; “a class of goods for which there is demand, but which is supplied without quantitative differentiation across the market. A commodity has full or partial fungibility; that is, the market treats its instances as equivalent or nearly so with no regard to who produced them”. Here, the takeaway is that commodities can be replaced easily for another piece of the same material. One Kg of wheat can easily be replaced with another Kg of wheat.
Commodities are generally classified in families: Energy, Metals & Minerals, Chemicals, and Agricultural commodities.
In summary, commodities are raw materials that can easily be replaced. Think of rice, crude oil, or iron ore.
They are generally produced and sourced as industrial products in bulk, and are progressively transformed into finished products.
Commodities are present all around us, from our cup of tea and chocolate bar to the chip components of your phone and laptops.