Agricultural Commodities

What is a commodity? The generic term for any marketable item produced to satisfy wants or needs. An agricultural commodity is a raw material or primary agricultural product that can be bought and sold copper or coffee

Fungibility Fungibility refers to the ability of a product whose individual units are capable of mutual substitution For instance, gold in New York is the same as gold in China, as long as it is of the same purity. Fungibility lets us trade huge quantities at one price. Prices move in direct response to supply and demand.

Types of Commodities Soft Commodities are those grown Hogs, corn, wheat Very volatile market, not easy to predict Hard commodities are mined or extracted Crude oil, gold, copper Easier to handle since materials do not rot and they are more integrated into the industrial process

Commodity Futures An agreement to buy or sell a set amount of a commodity at a predetermined price and date