Historically, commodity trading was prevalent well before other financial instruments entered the market. For decades, even centuries, trading in agricultural products was conducted as producers sold products to buyers. The primary purpose for commodity trading was to sell and buy the product – rather than gain from trading activities like speculating price movements, as much of the trading in the current day is. Over time, the scope of commodity trading has expanded to include metals and energy commodities, in addition to many others. In the present day, the digitalization of the marketplace has dramatically improved liquidity as more participants enter the market.
We commonly define a commodity as a physical asset that has uses in the production of other goods. The asset must be fungible in nature to be classified as a commodity, a. This means that it should be interchangeable. For example, iron is considered a commodity because it does not matter where it has been mined. The grade plays a part, but in broader terms, iron in China is not unique. It’s generally interchangeable with iron mined anywhere. The metal is a basis for the production of other products.
0:00 Music Intro 0:10 Intro 1:00 Disclaimer 1:15 What and why 3:20 Top 10 list 4:13 Agriculture 5:56 Precious metals 9:07 Energy 11:26 Final thoughts
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