commodities

Commodities are basic goods that are interchangeable with other goods of the same type and are typically used as inputs in the production of other goods or services. They are characterized by uniform quality, standardization, and market-wide pricing, allowing them to be traded on organized exchanges or over-the-counter markets. Common categories include agricultural products (such as wheat, corn, coffee, and cotton), energy resources (including crude oil, natural gas, and coal), metals (both industrial, like copper and aluminum, and precious, such as gold and silver), and other raw materials like timber and rubber.

The history of commodity trade stretches back to ancient barter systems, but modern commodity markets emerged with the development of futures contracts in the 19th century, notably the Chicago Board of Trade. Futures contracts obligate buyers and sellers to exchange a specified quantity of a commodity at a predetermined price on a future date, providing price discovery and risk‑management tools for producers, consumers, and investors. Spot markets, where immediate delivery occurs, also play a key role in price formation.

Pricing of commodities is influenced by supply and demand fundamentals, geopolitical events, weather conditions, technological changes, and speculative activity. Because many commodities are essential inputs for broader economies, their price volatility can affect inflation, trade balances, and monetary policy. Regulatory frameworks, such as those overseen by the Commodity Futures Trading Commission in the United States, aim to ensure market integrity and protect participants from fraud and manipulation.

Investors may access commodity exposure directly through physical ownership, futures contracts, exchange‑traded funds, or indirectly via equities of companies involved in extraction, production, or processing. While commodities can diversify portfolios and hedge against currency or inflation risks, they also carry unique risks related to storage, perishability, and market liquidity.