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Investment Dictionary


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Commodities

 

Commodities are goods or products that are traded in exchanges. Usually not all the goods that are produced are traded in exchange, only those which can be standardized enough to trade them at the identical price. For example, there are few classes of oil (WTI, Brent) and those are traded on exchange, but to be traded as a Brent crude oil it has to meet some criteria. But if item is hard to describe in strict criteria, for example - a wine, it won’t be traded in commodity exchange because all wines are different and cannot be traded in equal class and the same price level. 

 

There are two main item classes traded as commodities:

  • Basic recourses include mostly energetic recourses (oil, coal, electricity, etc.) and metals (gold, silver, iron ore, copper, aluminum etc.). However, not all the goods that may look it could be are commodities. For example, steel and steel products aren’t traded in stock exchange; natural gas is not traded in Europe (but is traded in USA) too.
  • Agricultural products include many raw or semi-finished products from agriculture (wheat, rice, soybean, cocoa, cattle, cheese etc.). Maybe some gourmets could say that food products from different regions have different taste but commodity exchanges don’t look so deep and are oriented to cheapest products of the class for mass consumption.

 

Read more about commodities investments or what is better investment: commodity or stock of commodity producer. 

 






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