What is a commodity and its characteristics?

Commodity refers to the material commodity that can enter the circulation field, but is not a retail link, and has the property of commodity and is used for industrial and agricultural production and consumption. In the financial investment market, bulk commodities refer to homogeneous, tradeable commodities that are widely used as industrial basic raw materials. Usually associated with futures trading, as has been introduced before, commodity trading market can be combined to learn.

There are many kinds of goods, which can be basically divided into three categories.

The first category is agricultural products, which are subdivided into grain and oil crops represented by soybeans, corn, rice, wheat, oats, mung beans, rapeseed (oil) and palm (oil); Cash crops represented by cotton, sugar, orange juice, apples, coffee and cocoa. (among them, marshmallows are also called soft goods); Forest products represented by natural rubber and plywood; Livestock products represented by pigs, live cattle and wool.

The second category is metals, subdivided into precious metals represented by gold, silver, platinum and palladium; Non-ferrous metals represented by copper, aluminum, lead, zinc, tin and nickel; Ferrous metals represented by iron, chromium and manganese.

The third category is energy and chemical industry. Energy sources include crude oil, heavy oil (fuel oil), asphalt, natural gas, diesel oil, gasoline, coke and thermal coal. Chemicals include polyethylene (commonly known as plastics), polyvinyl chloride (PVC), polypropylene (PP), purified terephthalic acid (PTA), ethanol (alcohol) and so on.

Commodity is at the most upstream of industrial production, and its price fluctuation will directly affect the downstream manufactured goods and the operation of the overall economy. On the contrary, the state of economic operation will have a negative effect on commodity prices, and the level of commodity prices is positively related to the overall economic cold and heat. For example, rising copper prices will increase the production costs of electronics, construction and power industries, while rising oil prices will lead to rising prices of chemical products and other energy sources. The downturn in the real estate market will curb the demand for steel and plastics. To a certain extent, investment in certain commodities is investment in related industries.

Through classification, we can also know that these are all futures varieties, and the prices change greatly when trading. Therefore, it is not difficult to understand the characteristics of goods:

First, the price fluctuates greatly. Only when commodity prices fluctuate greatly, traders who intend to avoid price risks need to use forward prices to determine prices first. For example, some commodities are subject to monopoly prices or planned prices, and the prices are basically unchanged. There is no need for commodity operators to use futures trading to avoid price risks or lock in costs.

Second, the supply and demand are large. The function of the futures market is based on the extensive participation of both the supply and demand sides of commodities. Only goods with large spot supply and demand can fully compete in a wide range and form authoritative prices.

Third, it is easy to classify and standardize. The quality standard of the delivered goods is stipulated in the futures contract in advance. Therefore, futures varieties must be commodities with stable quality, otherwise, it will be difficult to standardize.

Fourth, it is convenient for storage and transportation. Commodity futures are generally long-term delivery commodities, which requires these commodities to be easy to store, not easy to deteriorate and convenient to transport, so as to ensure the smooth delivery of futures.