Commodity Exchange

Commerce SSS1 Third Term

WEEK  1

Commodity Exchange

Performance Objectives

The student should be able to:

    1. Explain the term commodity.

    2. Mention the types of tradable commodities.

Content

Meaning of Commodity

The commodity is any good or material produced to satisfy wants or needs. Commodities may also be defined as materials or products that can be traded or exchanged for value at a particular time and at a pre-determined price. Any material or anything regarded as a commodity must possess standard quality and price. For instance, gold, silver are commodities because they have standardized quality and price which are objective and are determined in line with local or international standard. a is used to describe a class of goods for which there is demand but which is supplied without qualitative differentiation across a market. However, gold jewellery is not a commodity because the price is subjective depending on factors such as design, the period of a sale, etc.

Types of Commodity

Commodities are basically classified or divided into three categories.

1. Agricultural produce: These are goods that are grown or cultivated for human consumption. They include food crops, cash crops and livestock which are traded or exchanged at a pre-determined price and graded quality. Cash crops are sold in the international market based on certain standardized price and quality. Another name for agricultural produce is soft commodities. Examples are beans, wheat, sugar, coffee etc.

2. Solid minerals: They are basically solid materials which are extracted through mining. They include natural or mineral resources which can be sold in the local market or international market based on regulated pre-determined quality, quantity and price. Examples are gold, iron ore, silver, copper, tin, etc. Solid minerals can also be called hard commodities

3. Oil and gas/energy commodities: These entail commodities which are generated from certain sources for the purpose of domestic or industrial consumption. Such commodities are consumed as soon as they are produced because they cannot be stored for many years. Examples are electricity, gas, oil etc.