A commodity is something for which there is demand, but which is supplied without qualitative differentiation In marketing, product differentiation is the process of distinguishing the differences of a product or offering from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as one's own product offerings across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk.[1] In other words, copper is copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Stereos, on the other hand, have many levels of quality. And, the better a stereo is [perceived to be], the more it will cost.
One of the characteristics of a commodity good is that its price is determined as a function of its market as a whole. Well-established physical commodities have actively traded spot The spot market or cash market is a commodities or securities market in which goods are sold for cash and delivered immediately. Contracts bought and sold on these markets are immediately effective. Spot markets can operate wherever the infrastructure exists to conduct the transaction. The spot market for most securities exists primarily on the and derivative markets. Generally, these are basic resources and agricultural Agriculture refers to the production of food and goods through farming and forestry. Agriculture was the key development that led to the rise of civilization, with the husbandry of domesticated animals and plants creating food surpluses that enabled the development of more densely populated and stratified societies. The study of agriculture is products such as iron ore Iron ores are rocks and minerals from which metallic iron can be economically extracted. The ores are usually rich in iron oxides and vary in color from dark grey, bright yellow, deep purple, to rusty red. The iron itself is usually found in the form of magnetite , hematite (Fe2O3), goethite, limonite or siderite. Hematite is also known as ", crude oil Petroleum or crude oil is a naturally occurring, flammable liquid found in rock formations in the Earth consisting of a complex mixture of hydrocarbons of various molecular weights, plus other organic compounds, coal Coal is a readily combustible black or brownish-black sedimentary rock normally occurring in rock strata in layers or veins called coal beds. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure. It is composed primarily of carbon along with variable, ethanol Ethanol, also called ethyl alcohol, pure alcohol, grain alcohol, or drinking alcohol, is a volatile, flammable, colorless liquid. It is a psychoactive drug, best known as the type of alcohol found in alcoholic beverages and in modern thermometers. Ethanol is one of the oldest recreational drugs. In common usage, it is often referred to simply as, salt Salt is a dietary mineral composed primarily of sodium chloride that is essential for animal life, but toxic to most land plants. Salt flavor is one of the basic tastes, an important preservative and a popular food seasoning, sugar Sugar is a class of edible crystalline substances, mainly sucrose, lactose, and fructose. Human taste buds interpret its flavor as sweet. Sugar as a basic food carbohydrate primarily comes from sugar cane and from sugar beet, but also appears in fruit, honey, sorghum, sugar maple (in maple syrup), and in many other sources. It forms the main, coffee beans A coffee bean is the seed of the coffee plant . The fruits, coffee cherries or coffee berries, most commonly contain two stones with their flat sides together. Coffee beans consist mostly of endosperm that contains 0.8 - 2.5 % caffeine, which is one of the main reasons the plants are cultivated. As coffee is one of the world's most widely consumed, soybeans The soybean or soya bean (UK) (Glycine max) is a species of legume native to East Asia. The plant is classed as an oilseed rather than a pulse. It is an annual plant that has been used in China for 5,000 years as a food and a component of drugs. Soy contains significant amounts of all the essential amino acids for humans, which makes soy a good, aluminum Aluminium ( ˌæljʊˈmɪniəm ) or aluminum ( /əˈluːmɪnəm/ (help·info), see spelling below) is a silvery white and ductile member of the boron group of chemical elements. It has the symbol Al; its atomic number is 13. It is not soluble in water under normal circumstances. Aluminium is the most abundant metal in the Earth's crust, and the, rice Rice is the seed of the monocot plant Oryza sativa, of the grass family . As a cereal grain, it is the most important staple food for a large part of the world's human population, especially in tropical Latin America, the West Indies, East, South and Southeast Asia. It is the grain with the second highest worldwide production, after maize (", wheat Wheat is a worldwide cultivated grass from the Fertile Crescent region of the Near East. In 2007 world production of wheat was 607 million tons, making it the third most-produced cereal after maize (784 million tons) and rice (651 million tons). Wheat grain is a staple food used to make flour for leavened, flat and steamed breads; biscuits,, gold Gold is a chemical element with the symbol Au (Latin: aurum) and an atomic number of 79. It has been a highly sought-after precious metal in jewelry, in sculpture, and for ornamentation since the beginning of recorded history. The metal occurs as nuggets or grains in rocks, in veins and in alluvial deposits. Gold is dense, soft, shiny and the most and silver Silver is a chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal. The metal occurs naturally in its pure, free form (native silver), as an alloy with gold (electrum) and other metals,.
Commoditization Commodification is the transformation of goods and services (or things that may not normally be regarded as goods or services) into a commodity occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the intellectual capital The term Intellectual capital collectively refers to all resources that determine the value and the competitiveness of an enterprise. As such, it includes as subsets the attributes that concur to building all financial statements as well as the balance sheet. necessary to acquire or produce it efficiently. As such, goods that formerly carried premium margins for market A market is any one of a variety of different systems, institutions, procedures, social relations and infrastructures whereby persons trade, and goods and services are exchanged, forming part of the economy. It is an arrangement that allows buyers and sellers to exchange things. Markets vary in size, range, geographic scale, location, types and participants have become commodities, such as generic Generic brands of consumer products are distinguished by the absence of a brand name, although the term is actually improper usage of the word "generic", which actually means "relating to or descriptive of an entire group or class." Furthermore, it is often inaccurate to describe these products as "lacking a brand name& pharmaceuticals and silicon chips In electronics, an integrated circuit is a miniaturized electronic circuit (consisting mainly of semiconductor devices, as well as passive components) that has been manufactured in the surface of a thin substrate of semiconductor material. Integrated circuits are used in almost all electronic equipment in use today and have revolutionized the.
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Etymology
The word commodity came into use in English in the 15th century, it came from the French, "commodité", to benefit or profit. Going further back, the French word derived from the Latin commoditatem (nominative commoditas) meaning "fitness, adaptation,". The Latin root commod- meant variously "appropriate", "proper measure, time or condition" and advantage, or benefit.
Commodity trade
Main article: Futures exchange A futures exchange is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the futureIn the original and simplified sense, commodities were things of value, of uniform quality, that were produced in large quantities by many different producers; the items from each different producer are considered equivalent. It is the contract A contract is an exchange of promises between two or more parties to do, or refrain from doing, an act which is enforceable in a court of law. It is a binding legal agreement. That is to say, a contract is an exchange of promises for the breach of which the law will provide a remedy and this underlying standard that define the commodity, not any quality inherent in the product The noun product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce (prə doos' or -dyoos') from the Latin prōdūce(re), (to) lead or bring forth. Since 1575, the word "product" has referred to anything produced. Since 1695, the word has.
- Chicago Board of Trade The Chicago Board of Trade , established in 1848, is the world's oldest futures and options exchange. More than 50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million contracts. On 12 July 2007, the CBOT merged with the
- Kansas City Board of Trade The Kansas City Board of Trade , located at 4800 Main Street in Kansas City, Missouri, is a commodity futures and options exchange regulated by the Commodity Futures Trading Commission (CFTC) that specializes in the hard red winter wheat -- the principal ingredient of bread
- Euronext.liffe Source:"euronext.com". http://www.euronext.com/trader/indicescomposition/composition-4411-EN-FR0003502079.html?selectedMep=1&idInstrument=22218
- Kuala Lumpur Futures Exchange The Bursa Malaysia or Malaysia Exchange, MYX previously known as Kuala Lumpur Stock Exchange (KLSE, Bursa Saham Kuala Lumpur in Malay) dates back to 1930 when the Singapore Stockbrokers' Association was set up as a formal organisation dealing in securities in Malaya. In 1937 it was re-registered as the Malayan Stockbrokers' Association, but it
- Bhatinda Om & Oil Exchange
- London Metal Exchange The London Metal Exchange or LME is the futures exchange with the world's largest market in options, and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates of up to three months from trade date, along with longer-dated contracts, it also allows for cash trading. It offers hedging, worldwide reference
- New York Mercantile Exchange The New York Mercantile Exchange is the world's largest physical commodity futures exchange, located in New York City. Its two principal divisions are the New York Mercantile Exchange and Commodity Exchange, Inc (COMEX) which were once separate but are now merged. The parent company of the New York Mercantile Exchange, Inc., NYMEX Holdings, Inc
- Multi Commodity Exchange Multi Commodity Exchange is an independent commodity exchange based in India. It was established in 2003 and is based in Mumbai. The turnover of the exchange for the period Apr-Dec 2008 was INR 32 Trillion . MCX offers futures trading in Agricultural Commodities, Bullion, Ferrous & Non-ferrous metals, Pulses, Oils & Oilseeds, Energy,
- Dalian Commodity Exchange The Dalian Commodity Exchange (simplified Chinese: 大连商品交易所; traditional Chinese: 大連商品交易所; pinyin: Dàlián Shāngpin Jiāoyìsuǒ) is a Chinese futures exchange based in Dalian. It is a non-profit, self-regulating and membership legal entity established on February 28, 1993
Markets for trading commodities Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts can be very efficient Economic efficiency is used to refer to a number of related concepts. It is the using of resources in such a way as to maximize the production of goods and services. A system can be called economically efficient if:, particularly if the division into pools matches demand segments A market segment is a group of people or organizations sharing one or more characteristics that cause them to have similar product and/or service needs. A true market segment meets all of the following criteria: it is distinct from other segments , it is homogeneous within the segment (exhibits common needs); it responds similarly to a market. These markets will quickly respond to changes in supply and demand Supply and demand is an economic model based on price, utility and quantity in a market. It concludes that in a competitive market, price will function to equalize the quantity demanded by consumers, and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity. An increase in the quantity produced or supplied to find an equilibrium In economics, economic equilibrium is simply a state of the world where economic forces are balanced and in the absence of external influences the values of economic variables will not change. It is the point at which quantity demanded and quantity supplied are equal. Market equilibrium, for example, refers to a condition where a market price is price Price in economics and business is the result of an exchange and from that trade we assign a numerical monetary value to a good, service or asset. If Alice trades Bob 4 apples for an orange, the price of an orange is 4 apples. Inversely, the price of an apple is 1/4 oranges and quantity. In addition, investors can gain passive exposure to the commodity markets through a commodity price index A commodity price index is a fixed Mandan weight index or average of selected commodity prices, which may be spot or futures prices. It is designed to be representative of the broad commodity asset class or a specific subset of commodities, such as energy or metals.
Commodities in Marxism
For the Marxist definition of a commodity, see Commodity (Marxism) In classical political economy and especially Karl Marx's critique of political economy, a commodity is any good or service produced by human labour and offered as a product for general sale on the market. Some other priced goods are also treated as commodities, e.g. human labor-power, works of art and natural resources, even although they may not.In classical political economy and especially Karl Marx's critique of political economy, a commodity is any good or service produced by human labour and offered as a product for general sale on the market. Some other priced goods are also treated as commodities, e.g. human labor-power, works of art and natural resources, even although they may not be produced specifically for the market, or be non-reproducible goods.
Marx's analysis of the commodity is intended to help solve the problem of what establishes the economic value of goods, using the labor theory of value. This problem was extensively debated by Adam Smith, David Ricardo and Karl Rodbertus-Jagetzow among others. Value and price are not equivalent terms in economics, and theorising the specific relationship of value to market price has been a challenge for both liberal and Marxist economists.
See also
- List of traded commodities The following metals are not, at present , traded on any exchange, such as the London Metal Exchange (LME), and, therefore, no spot or futures market, where producers, consumers and traders can fix an official or settlement price exists for these metals.[citation needed] The only price information that is available globally is published by, among
- Commodity fetishism
- Commodity (Marxism) In classical political economy and especially Karl Marx's critique of political economy, a commodity is any good or service produced by human labour and offered as a product for general sale on the market. Some other priced goods are also treated as commodities, e.g. human labor-power, works of art and natural resources, even although they may not
- Commodity markets Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts
- Commodity money Commodity money is money whose value comes from a commodity out of which it is made. It is objects that have value in themselves as well as for use as money
- Commodity price index A commodity price index is a fixed Mandan weight index or average of selected commodity prices, which may be spot or futures prices. It is designed to be representative of the broad commodity asset class or a specific subset of commodities, such as energy or metals
- Trade Trade is the voluntary transaction or exchange of goods, services, or both. Trade is also called commerce. A transaction mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals , bill, paper money. Modern traders
- Jim Rogers James Beeland Rogers, Jr. is an expatriate American investor and financial commentator based in Singapore. He was a co-founder, along with George Soros, of the Quantum Fund, and is a college professor, author, world traveler, economic commentator, and creator of the Rogers International Commodities Index (RICI) (commodities expert)
- Trading Places Trading Places is an Academy Award-nominated 1983 comedy film starring Dan Aykroyd, Eddie Murphy and Jamie Lee Curtis. It was directed by John Landis and written by Timothy Harris and Herschel Weingrod. It was produced by Aaron Russo - comedic film about playing the commodity markets
Notes
- ^ Sullivan, arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 152. ISBN 0-13-063085-3. http://www.pearsonschool.com/index.cfm?locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4.
External links
- ICIS, Petrochemical, oil and energy commodity price analysis and data
- Historical Commodity Prices, indexmundi.com.
- VM Group, Commodity Research & Analysis
- Barret Capital Inc, Retail Commodities Futures and Options
Categories: Commodities used as an investment | Business terms
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Q. What is the best commodity to invest $900 in right now? is it crude? agric? or gold? I'm talking long term also.
Asked by xyzed23 - Tue Nov 4 07:21:45 2008 - - 8 Answers - 0 Comments
A. Short term, and definately long term, gold is your safest bet. It's the only thing that has stood the test of time. Some good reading material below.
Answered by Shelby R - Fri Nov 7 14:50:05 2008
