subcommodities

Subcommodities are specific products within a broader commodity category that are distinguished by quality, grade, form, or end use. They may be traded as separate contracts or tracked as distinct price series, reflecting heterogeneity among items that share a common agricultural, energy, or metal origin. For example, within agriculture, subcommodities include different varieties or grades of crops (Arabica versus Robusta coffee; raw versus refined sugar; milling wheat versus feed wheat). In energy, crude oil benchmarks such as WTI and Brent are often treated as separate subcomponents within the broader crude-oil market, as are refined products and natural gas differentiated by delivery specification. In metals, grade and alloy content (high-grade steel scrap, base metals with different purity) can create subcommodity distinctions.

Subcommodities matter because quality differentials and logistical specifications create price dispersion and basis risk. They often exhibit different supply chains, seasonality, and refinery or milling requirements, which can affect hedging strategies and index construction. Because subcommodities can be less liquid than a broad benchmark, price data may be sparser and more sensitive to delivery points, storage, and transportation costs. Market participants use subcommodity data to improve price discovery, risk management, and the assessment of sector-specific fundamentals.

Note that 'subcommodity' usage is not uniformly standardized; different data providers and markets may classify heterogeneity within a commodity in varying ways. See also commodity futures, commodity indices, grade and quality differentials.