AskDefine | Define commodities

User Contributed Dictionary



  1. Plural of commodity

Extensive Definition

A commodity is anything for which there is supply, but which is demanded without qualitative differentiation across a foreign market.
Characteristic of commodities is that their prices are determined as a function of their market as a whole. Well-established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agricultural products such as iron ore, crude oil, coal, ethanol, sugar, coffee beans, soybeans, aluminum, rice, wheat, gold and silver.
Commoditization occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently. As such, goods that formerly carried premium margins for market participants have become commodities, such as generic pharmaceuticals and silicon chips. Linguistically, the word commodity came into use in English in the 15th century, derived from the French word "commodité", similar in meaning to "convenience" in terms of quality of services. The Latin root meaning is commoditas, referring variously to the appropriate measure of something; a fitting state, time or condition; a good quality; efficaciousness or propriety; and advantage, or benefit. The German equivalent is die Ware, i.e. wares or goods offered for sale. The French equivalent is "produit de base" or "matière première" like energy, goods, or industrial raw materials.
A commodity's value changes over time.

Commodity trade

In 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 and this underlying standard that define the commodity, not any quality inherent in the product.
Markets for trading commodities can be very efficient, particularly if the division into pools matches demand segments. These markets will quickly respond to changes in supply and demand to find an equilibrium price and quantity. In addition, investors can gain passive exposure to the commodity markets through a commodity price index.

See also

commodities in Breton: Marc'hadourezh
commodities in German: Handelsware
commodities in Spanish: Commodities
commodities in French: matière première
commodities in Indonesian: Komoditi
commodities in Italian: Commodity
commodities in Dutch: Commodities
commodities in Portuguese: Commodity
commodities in Swedish: Handelsvara
commodities in Yiddish: קאמאדיטי
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