Commodity Types

When related to trade, a commodity represents a basic good interchangeable with other goods of the same type. Commodities also refer to bulk goods and raw materials used to produce consumer products. Commodities are generally divided into two types: hard and soft commodities. Hard commodities refer to natural resources, and soft commodities include agricultural products and livestock.

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The reasons why commodities are separated into different types are the following: it is easier to compare prices, it is easier to research them and it is more convenient for trade.

There also exist other commodity classifications. In several sources you can find 4 categories of trading commodities:
- energy (examples: crude oil, natural gas, gasoline, solar power)
- metals (examples: iron, zinc, aluminium, including precious metals)
- livestock and meat
- agricultural products (fruits, vegetables, cereals, coffee, cotton, sugar)

In some classifications there is also a 5th commodity type – financial commodity, which refers to financial products such as currency or stock and bond indexes.

Commodities are bought, sold and traded on commodity markets. A commodity market represents a physical or online marketplace for buying, selling and trading raw or primary products. Commodity exchanges play a vital role to the economy, making it much more efficient.