A good which is supplied without qualitative differentiation across a market.
Traditionally a commodity was a physical raw material that was an essential ingredient in a manufactured product.
The definition has expanded to encompass manufactured basic industrial inputs such as steel and even intangible rights such as carbon emissions created by legislation rather than by nature.
Physical commodities have historically been categorised as:
- 'Hard' commodities which are mined or extracted, including metals and oil; or
- 'Soft' commodities which are grown or reared, such as agricultural products and livestock.
Commodities are, by definition, fungible.
However, detailed contract specifications may differ.
For example, Brent Crude oil and WTI (West Texas Intermediate) are quoted separately, with different prices.