What Is a Commodity?

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 A commodity is a basic good used in commerce that is interchangeable with other goods of the same type.

  • Commodities are frequently utilized as inputs in the manufacture of other commodities or services. Thus, a commodity is typically defined as raw materials used in the production of completed items. A product, on the other hand, is the finished item that is sold to customers
  • Hard commodities refer to energy and metals products while soft commodities are often agricultural goods.
  •  Hard commodities are usually classified as those that are mined or extracted from the earth. These can include metals, ore, and petroleum (energy) products.
  • Soft commodities instead refer to those that are grown, such as agricultural products. These include wheat, cotton, coffee, sugar, and soybeans, among others.

   

                             

  • Commodities are encouraged to be included in a diversified portfolio as a hedge against inflation.

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