Definition of Commodities: Nature, Types and Types

What is the meaning of commodities? Commodities are no stranger to the economic world. For those who are involved in the economic world may already be familiar with the term commodity.

However, many still do not know what the meaning of commodity is. Therefore, this article will discuss about commodities.

Starting from the concept of commodity in general, the concept of commodity in language, the concept of commodity in economics, types of commodities, types, until the trading system.

Definition of Commodity

A commodity is an item or product that can be traded. Trading itself is a job related to the activity of selling and buying an item. Of course the goal is to make a profit.

Same thing, the purpose of this commodity is also to get a profit. Commodity trading can also be done through barter. In that case, the meaning is that an item will be exchanged for another item or product.

However, it has a note. The value of the two items to be exchanged must match. Only then can the two items or products be exchanged for each other.

According to other opinions, the meaning of commodity is a real thing. Those things tend to be easy to trade. In addition, it can also be submitted in physical form.

Commodities can also be stored for a certain period of time. And, it can be exchanged with other goods of the same type, which investors trade on the futures exchange.

According to KBBI or Kamus Besar Bahasa Indonesia, commodity has the meaning of the main trade product. It can also be said to be a commodity. In general, raw products can be classified based on several things, namely quality and compliance with international trade standards. Examples are coffee, wheat, corn, rubber, rice and so on.

Based on the explanations above, it can be concluded that the concept of commodity is a main trade product. In addition, it can also be said that the definition of commodity is other goods that can be traded, as import or export goods.

The purpose of selling and buying these commodities is nothing but to make a profit. In a more general context, indices, foreign currencies and instruments can also be classified as commodities. Reason, including as an easy product when you want to trade. So, the concept of commodity does not only refer to the daily needs of the community.

Definition of Commodity in Language

The meaning of the word commodity is something pleasant in service and quality. In the root of the Latin language, it is called commodity. Refers to various ways in accurate measurement.

From a state of time. Good condition, good quality, ability to produce something or property, and added profit value.

In Germany, goods or products offered for sale are called die ware. While in France it is called produit de base. For example, industrial raw materials, energy or other goods.

In Indonesia itself, it can be said to be merchandise, raw materials or merchandise. These things can be classified based on their quality. Something with international trade standards. Such as coffee, rubber, wheat and so on.

Understanding Commodities in Economics

In treating this commodity, the market does not pay attention to the producer or brand that produces it. As an illustration, for example wheat. Starting from the principle, the market will not bother to problematize who has produced the commodity.

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What is a boy from Russia? What is a farmer from India? Or a capitalist from England? The market will treat the commodity accordingly.

Commodity Nature

  • A good will be produced and sold by many producers. The manufacturer is different.
  • An item will be uniform in quality in each marketing chain.

Based on the two properties of the commodity, the consumer or the market cannot distinguish the goods that will be produced by the producer. They can distinguish one producer from another.

However, not all tangible goods are commodities. For example such as clothing convection. Although mass-produced, not based on orders by many manufacturers, a garment convection is not included as a commodity.

Clothing is a thing that has an existence, which is used by everyone. However, clothing is not the basic material. Clothing is a finished product.

Economists say that clothing is product differentiation from fabric. Commodities will experience the expansion of the definition along with the development of technology and science.

Currently, commodities are not only dominated by products from agriculture or mining. However, commodities have also penetrated financial products. Examples are indices and foreign currencies. In addition, also information technology products, for example such as mobile phone bandwidth.

Commodity Product Types

1. Metal

The first type of commodity product is metal. Commodities of this type of metal consist of goods or products produced from mining activities, and are metallic in nature. Commodities of this type can also be divided into two more types.

The two types are precious metals and industrial metals. For precious metal types, examples are gold, platinum, silver and palladium. In general, this commodity is calculated using troy ounces. However, specifically for gold products, jufa trading activities can be done using units in the form of kilograms.

On the other hand, industrial metals are products referred to as nickel, cobalt, copper, aluminum, tin, magnesium, titanium and so on. Typically, added products of this type will be traded using metric units. It can be ounces, kilograms, even tons.

2. Energy

The type of energy commodity is also as hard as metal. Energy commodities can also be in the form of all products produced from minerals. And in the form of exploration.

However, the product can be used by humans as a fuel. Generally, products from this energy commodity will be traded on an international scale. Use metric units, tons or barrels.

Some examples of energy commodities in natural gas, coal, diesel, unleaded gasoline and petroleum (Brent Crude Oil and Light Sweet Crude Oil).

3. Agriculture

The third type of commodity product is agriculture. Most of the products obtained from an agricultural product can be used to meet human needs. Agricultural commodities can also be divided into two groups.

The two groups, among others, are agricultural products and forestry products. Examples of agricultural products include soybeans, rice, sugar, corn, wheat, coffee and so on. Examples of forestry products are rattan palm, rubber and so on.

In trading, products from agricultural commodities will be calculated using units of ounces, kilograms, tons and bushels.

4. Livestock

The last type of commodity is livestock. Animal husbandry products are products derived from animal husbandry. Sufficient livestock.

Examples are meat, milk and food. Examples of mother farm commodities are cows, beef, cow’s milk, chicken, chicken meat, pork, pork, animal feed and so on. In trading, this type of livestock will generally be sold using pounds.

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Commodity Type

Here is the explanation:

1. Hard commodities

Hard commodities are various variants obtained from natural products. Through activities such as mining or extraction. Some kind of petroleum, metal, etc.

This type of commodity will mostly be dominated by various energy products. Examples are coal, natural gas, and oil. Therefore, it is not surprising if a country that depends on the export of these products will have a currency value that is very influential on volatility.

Inu applies to the volatility of commodity prices to the country or region that the country exports to.

2. Soft commodities

The type of soft commodity is a type of product variant obtained from forestry, agriculture and animal husbandry. Examples are sugar, rice, soybeans, salt, rubber, cow’s milk, corn, coffee beans, fish, palm oil, chicken meat, teak wood and so on.

The price of this type of soft commodity has a fluctuating movement. This means that the price can rise and fall suddenly. It is caused by the influence of natural conditions.

Therefore, the price of the commodity cannot be predicted accurately. This type of commodity is also not always available in every region and country. This is also due to natural conditions. Such as the influence of climate and weather.

Commodity Trading System

Commodity prices depend on the amount of demand and supply from the market. Price fluctuations have become a risk that is generally felt by commodity traders.

An increase or decrease in price can occur due to several factors. Some of these factors include weather conditions, intensive or government restrictions, production capacity, season, political situation and so on.

That is what will make commodity trading have a future contract. It will consist of basic standards. On the minimum amount and quality of commodities that will be traded later.

When talking about commodity trading, there are two types of trading that are generally present in the market. First, known as the manufacturer. Second, known as speculators. Both of these things have differences that are quite significant.

For a producer, a futures contract will be used to protect the value or price of the commodity. This is done until the contract is completed.

Examples of commodity traders with this type are soybean farmers. It performs value protection from the risk of price loss. That is done if the price of soybeans will drop before the harvest time arrives.

Through a futures contract, the farmer will be able to sell soybeans while they are still planted. That makes the selling price more determined until harvest time arrives later.

As for speculators, they are traders in the commodity market. The merchant does trading activities. The purpose is to make a profit. Speculators will take profit by relying on a price fluctuation.

Therefore, speculators generally do not own futures contracts. However, it can be profitable. This is done by taking advantage of fluctuating commodity prices.

That’s a brief explanation of commodities. Starting from the concept of commodity in general, the concept of commodity in language, the concept of commodity in economics, the types, until the trading system.