{"id":35438,"date":"2022-12-07T17:42:48","date_gmt":"2022-12-07T17:42:48","guid":{"rendered":"https://www.5paisa.com/finschool/?post_type=markets\u0026#038;p=35438"},"modified":"2025-10-30T13:21:46","modified_gmt":"2025-10-30T07:51:46","slug":"what-are-commodities","status":"publish","type":"markets","link":"https://www.5paisa.com/finschool/course/commodity-trading-course/what-are-commodities/","title":{"rendered":"What Are Commodities"},"content":{"rendered":"\u003cdiv data-elementor-type=\u0022wp-post\u0022 data-elementor-id=\u002235438\u0022 class=\u0022elementor elementor-35438\u0022\u003e\u003csection class=\u0022elementor-section elementor-top-section elementor-element elementor-element-23ba90b elementor-section-full_width tab_container elementor-section-height-default elementor-section-height-default\u0022 data-id=\u002223ba90b\u0022 data-element_type=\u0022section\u0022\u003e\u003cdiv class=\u0022elementor-container elementor-column-gap-default\u0022\u003e\u003cdiv 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background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch3 style=\u0022text-align: left\u0022\u003e\u003cstrong\u003e\u003cspan style=\u0022color: #f1566d\u0022\u003e1.1 What are physical commodities\u003c/span\u003e\u003c/strong\u003e\u003c/h3\u003e\u003cp style=\u0022text-align: center\u0022\u003e\u003ca href=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Auction-amico.svg\u0022\u003e\u003cimg fetchpriority=\u0022high\u0022 decoding=\u0022async\u0022 width=\u0022500\u0022 height=\u0022500\u0022 class=\u0022aligncenter wp-image-45700 size-full\u0022 role=\u0022img\u0022 src=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Auction-amico.svg\u0022 alt=\u0022\u0022 srcset=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Auction-amico.svg 150w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Auction-amico.svg 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Auction-amico.svg 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Auction-amico.svg 1536w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Auction-amico.svg 2048w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Auction-amico.svg 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Auction-amico.svg 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Auction-amico.svg 96w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Auction-amico.svg 500w\u0022 sizes=\u0022(max-width: 500px) 100vw, 500px\u0022 /\u003e\u003c/a\u003e\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003ch3 style=\u0022text-align: left\u0022\u003e\u003c/h3\u003e\u003cp\u003eThe trade in physical commodities is important for global economy. There are fundamental raw materials from which we build and power cities, run transport and feed ourselves – the basic stuff of life. Commodities are basic products, but not every basic product is a commodity. So what makes them different? It is important to stress their physical nature. Ultimately, one way or another, all commodities come out of the ground. Fundamentally, these are products created by natural forces.\u003c/p\u003e\u003cp\u003eThere are certain implications in commodity market- 1) every shipment is unique – its chemical form depends on exactly when and where it originated 2) There is no such thing as a standard physical commodity. To be saleable, commodities have to be put into a usable form and moved to where they can be used, at the time they are needed.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eCOMMODITIES FOR HEAT, TRANSPORT, CHEMICAL MANUFACTURING AND ELECTRICITY\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u003cimg decoding=\u0022async\u0022 class=\u0022size-medium wp-image-35264 aligncenter\u0022 src=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/1-300x300.png\u0022 alt=\u0022\u0022 width=\u0022300\u0022 height=\u0022300\u0022 srcset=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/1-300x300.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/1-150x150.png 150w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/1-50x50.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/1-100x100.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/1-96x96.png 96w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/1.png 500w\u0022 sizes=\u0022(max-width: 300px) 100vw, 300px\u0022 /\u003e\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide02\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Key Characteristics \u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch3 style=\u0022text-align: left\u0022\u003e\u003cstrong\u003e\u003cspan style=\u0022color: #f1566d\u0022\u003e1.2.Key Characteristics\u003c/span\u003e\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003ca href=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Audit-amico.svg\u0022\u003e\u003cimg decoding=\u0022async\u0022 width=\u0022500\u0022 height=\u0022500\u0022 class=\u0022aligncenter wp-image-45701 size-full\u0022 role=\u0022img\u0022 src=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Audit-amico.svg\u0022 alt=\u0022\u0022 srcset=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Audit-amico.svg 150w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Audit-amico.svg 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Audit-amico.svg 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Audit-amico.svg 1536w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Audit-amico.svg 2048w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Audit-amico.svg 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Audit-amico.svg 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Audit-amico.svg 96w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Audit-amico.svg 500w\u0022 sizes=\u0022(max-width: 500px) 100vw, 500px\u0022 /\u003e\u003c/a\u003e\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003ePhysical commodities come in all shapes and sizes, but they also have certain characteristics in common:\u003c/p\u003e\u003cul\u003e\u003cli\u003eThey are delivered globally, including by sea, usually in bulk.\u003c/li\u003e\u003cli\u003eEconomies of scale favour bulk delivery. The cost of transportation makes location a significant pricing factor.\u003c/li\u003e\u003cli\u003eCommodities with similar physical characteristics are exchangeable, but these are not standard items. Exchanging them may have an effect on price and quality.\u003c/li\u003e\u003cli\u003eThere is no premium for branded goods. Pricing is determined by product quality and availability.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eThey can be stored for long, in some cases unlimited, periods. It is these characteristics that make commodities suitable for trading in global markets.\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide03\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Fundamentals of Commodity Pricing\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch3 style=\u0022text-align: left\u0022\u003e\u003cstrong\u003e\u003cspan style=\u0022color: #f1566d\u0022\u003e1.3.Fundamentals of commodity pricing\u003c/span\u003e\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003ca href=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 width=\u0022500\u0022 height=\u0022500\u0022 class=\u0022aligncenter wp-image-45702 size-full\u0022 role=\u0022img\u0022 src=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg\u0022 alt=\u0022\u0022 srcset=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg 150w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg 1536w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg 2048w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg 96w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Bankruptcy-amico.svg 500w\u0022 sizes=\u0022(max-width: 500px) 100vw, 500px\u0022 /\u003e\u003c/a\u003e\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003eEnd-users buy physical commodities to meet staple needs. The commodity has to be fit for purpose and it needs to be available. These requirements determine the three pillars for pricing:\u003c/p\u003e\u003cul\u003e\u003cli\u003eWhere: delivery location\u003c/li\u003e\u003cli\u003eWhen: delivery timing\u003c/li\u003e\u003cli\u003eWhat: the product quality or grade\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eCommodity trading firms bridge gaps between producers and consumers based on these three pillars, through transformations in space, time and form.\u003c/p\u003e\u003cul\u003e\u003cli\u003eSpace: transport the commodity to alter its location;\u003c/li\u003e\u003cli\u003eTime: store the commodity to change the timing of delivery;\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eForm: blend the commodity to affect its quality or grade.\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide04\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Main Types\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch3 style=\u0022text-align: left\u0022\u003e\u003cstrong\u003e\u003cspan style=\u0022color: #f1566d\u0022\u003e1.4.Main Types\u003c/span\u003e\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003ca href=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 width=\u0022500\u0022 height=\u0022500\u0022 class=\u0022aligncenter wp-image-45704 size-full\u0022 role=\u0022img\u0022 src=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg\u0022 alt=\u0022\u0022 srcset=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg 150w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg 1536w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg 2048w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg 96w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Business-solution-amico.svg 500w\u0022 sizes=\u0022(max-width: 500px) 100vw, 500px\u0022 /\u003e\u003c/a\u003e\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003eBroadly speaking, physical commodities come in two forms:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003ePrimary commodities\u003c/strong\u003e are either extracted or captured directly from natural resources. They come from farms, mines and wells. As natural products that come out of the ground, primary commodities are non-standard – their quality and characteristics vary widely.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eSecondary commodities\u003c/strong\u003e are produced from primary commodities to satisfy specific market needs. Crude oil is refined to make gasoline and other fuels; concentrates are smelted to produce metals. There may be minor variations in quality depending on how a secondary commodity is produced.\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide05\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Which kinds of commodities are traded in the world?\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch3 style=\u0022text-align: left\u0022\u003e\u003cstrong\u003e\u003cspan style=\u0022color: #f1566d\u0022\u003e1.5 Which kinds of commodities are traded in the world? \u003c/span\u003e\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003ca href=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 width=\u0022500\u0022 height=\u0022500\u0022 class=\u0022aligncenter wp-image-45705 size-full\u0022 role=\u0022img\u0022 src=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg\u0022 alt=\u0022\u0022 srcset=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg 150w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg 1536w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg 2048w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg 96w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Credit-assesment-amico.svg 500w\u0022 sizes=\u0022(max-width: 500px) 100vw, 500px\u0022 /\u003e\u003c/a\u003e\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003eIn the global markets, there are four categories of commodities in which trading takes place:\u003c/p\u003e\u003cul\u003e\u003cli\u003eEnergy (e.g., crude oil, heating oil, natural gas and gasoline).\u003c/li\u003e\u003cli\u003eMetals (e.g., precious metals such as gold, silver, platinum and palladium; base metals such as aluminium, copper, lead, nickel, tin and zinc; and industrial metals such as steel).\u003c/li\u003e\u003cli\u003eLivestock and meat (e.g., lean hogs, pork bellies, live cattle and feeder cattle).\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eAgricultural (e.g., corn, soybean, wheat, rice, cocoa, coffee, cotton and sugar).\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide06\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Factors Influencing The Commodity Prices\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch3 style=\u0022text-align: left\u0022\u003e\u003cstrong\u003e\u003cspan style=\u0022color: #f1566d\u0022\u003e1.6.Factors influencing the commodity prices \u003c/span\u003e\u003c/strong\u003e\u003c/h3\u003e\u003cp style=\u0022text-align: center\u0022\u003e\u003ca href=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Finance-amico.svg\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 width=\u0022500\u0022 height=\u0022500\u0022 class=\u0022alignnone wp-image-45706 size-full\u0022 role=\u0022img\u0022 src=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Finance-amico.svg\u0022 alt=\u0022\u0022 srcset=\u0022https://www.5paisa.com/gujarati/finschool/wp-content/uploads/2022/12/Finance-amico.svg 150w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Finance-amico.svg 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Finance-amico.svg 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Finance-amico.svg 1536w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Finance-amico.svg 2048w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Finance-amico.svg 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Finance-amico.svg 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Finance-amico.svg 96w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/12/Finance-amico.svg 500w\u0022 sizes=\u0022(max-width: 500px) 100vw, 500px\u0022 /\u003e\u003c/a\u003e\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003col\u003e\u003cli\u003e\u003cstrong\u003eDemand \u0026amp; Supply\u003c/strong\u003e: Demand for the commodity and supply of the same are the two basic factors that drives commodity prices. Higher the demand for the commodity dearer will be its price and higher the supply of commodities cheaper will be the price.\u003c/li\u003e\u003cli\u003e2\u003cstrong\u003e. Seasonality\u003c/strong\u003e: some commodities follow a certain schedule of production cycle which can impact the prices of the commodities. For example, agricultural commodities, in harvesting season, due to an increase in supply, prices of commodities can come down whereas in sowing season supply remains lower which results in increase in prices.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eNews:\u003c/strong\u003e just like any other financial product, commodity prices are sensitive to the news and rumours. Hence any important news / directly related news can affect the commodity prices significantly.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eEconomic conditions:\u003c/strong\u003e the domestic and macroeconomic conditions can influence the commodity prices. Various economic indicators like GDP growth rate, industrial production, inflation rate etc. plays very important role in determining price trend of the commodity.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eWeather conditions\u003c/strong\u003e: weather is one of the important factors that can affect the prices of commodity specially agriculture commodity at high levels.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eGeo-political developments\u003c/strong\u003e: commodities that have global demand like crude oil are subject to price fluctuations. For example, tensions in the middle-east region may affect prices of crude oil potential disturbances in supply chain.\u003c/li\u003e\u003c/ol\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003cscript type=\u0027text/javascript\u0027\u003ejQuery(document).ready(function()  {jQuery(\u0027#text_slider\u0027).owlCarousel({items  :  1,smartSpeed  :  400,autoplay  :  false,autoplayHoverPause  :  false,smartSpeed  :  400,fluidSpeed  :  400,autoplaySpeed  :  400,navSpeed  :  400,dotsSpeed  :  400,dotsEach  :  1,loop  :  false,nav  :  true,navText  :  [\u0027Previous\u0027,\u0027Next\u0027],dots  :  true,responsiveRefreshRate  :  200,slideBy  :  1,mergeFit  :  true,autoHeight  :  true,mouseDrag  :  false,touchDrag  :  true});jQuery(\u0027#text_slider\u0027).css(\u0027visibility\u0027, \u0027visible\u0027);var  owl_goto  =  jQuery(\u0027#text_slider\u0027);jQuery(\u0027.text_slider_goto1\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  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