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In
economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of plant life and a bran ...

economics
, a commodity is an economic
good 125px, In many Western religions, angels are considered to be good beings and are contrasted with devils who are considered evil In most contexts, the concept of good denotes the conduct that should be preferred when posed with a choice betwee ...

good
, usually a
resource Resource refers to all the materials available in our environment which help us to satisfy our needs and wants. Resources can broadly be classified upon their availability — they are classified into renewable File:Global Vegetation.jpg, Global ...

resource
, that has full or substantial
fungibility In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of good ...
: that is, the
market Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finland and Sweden Art, entertainment, and media Films *Market (1965 film), ''Market'' (1965 ...
treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a commodity good is typically determined as a function of its market as a whole: well-established physical commodities have actively traded
spot Spot or SPOT may refer to: Places * Spot, North Carolina, a community in the United States * The Spot, New South Wales, a locality in Sydney, Australia * South Pole Traverse, sometimes called the South Pole Overland Traverse People * SPOT (produc ...
and
derivative In mathematics Mathematics (from Greek: ) includes the study of such topics as numbers (arithmetic and number theory), formulas and related structures (algebra), shapes and spaces in which they are contained (geometry), and quantities ...
markets. The wide availability of commodities typically leads to smaller
profit margin Profit margin, net margin, net profit margin or net profit ratio is a measure of profitability An economic profit is the difference between the revenue a commerce , commercial entity has received from its outputs and the opportunity costs of its ...
s and diminishes the importance of factors (such as
brand name A brand is a name, term, design, symbol or any other feature that identifies one seller's good or service as distinct from those of other sellers. Brands are used in business Business is the activity of making one's living or making mon ...

brand name
) other than price. Most commodities are
raw material A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished Product (business), products, energy, or intermediate materials that are feedstock for future finis ...
s, basic resources,
agricultural Agriculture is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary Image:Family watching television 1958.jpg, Exercise trends, Increases in sedentary behaviors such as watching tele ...

agricultural
, or
mining Mining is the extraction of valuable mineral In geology and mineralogy, a mineral or mineral species is, broadly speaking, a solid chemical compound with a fairly well-defined chemical composition and a specific crystal structure that occu ...

mining
products, such as
iron ore Iron ores are rocks In geology Geology (from the Ancient Greek γῆ, ''gē'' ("earth") and -λoγία, ''-logia'', ("study of", "discourse")) is an Earth science concerned with the solid Earth, the rock (geology), rocks of which it i ...
,
sugar Sugar is the generic name for sweet-tasting, soluble carbohydrate is a disaccharide A disaccharide (also called a double sugar or ''biose'') is the sugar formed when two monosaccharides are joined by glycosidic linkage. Like monosacc ...

sugar
, or
grain A grain is a small, hard, dry seed A seed is an embryonic ''Embryonic'' is the twelfth studio album by experimental rock band the Flaming Lips released on October 13, 2009, on Warner Bros. Records, Warner Bros. The band's first double album ...

grain
s like
rice Rice is the seed A seed is an embryonic ''Embryonic'' is the twelfth studio album by experimental rock band the Flaming Lips released on October 13, 2009, on Warner Bros. Records, Warner Bros. The band's first double album, it was relea ...

rice
and
wheat Wheat is a grass widely cultivated for its seed, a cereal grain which is a worldwide staple food. The many species of wheat together make up the genus ''Triticum''; the most widely grown is common wheat Common wheat (''Triticum aestivum'' ...

wheat
. Commodities can also be
mass-produced Mass production, also known as flow production or continuous production, is the production of substantial amounts of standardized Standardization or standardisation is the process of implementing and developing technical standard A technic ...
unspecialized products such as
chemicals A chemical substance is a form of matter In classical physics and general chemistry, matter is any substance that has mass and takes up space by having volume. All everyday objects that can be touched are ultimately composed of atoms, which ...
and
computer memory In computing Computing is any goal-oriented activity requiring, benefiting from, or creating computing machinery. It includes the study and experimentation of algorithmic processes and development of both computer hardware , hardware and soft ...
.


Etymology

The word ''commodity'' came into use in English in the 15th century, from the French '' commodité'', "amenity, convenience". Going further back, the French word derives from the Latin ''
commoditas
commoditas
'', meaning "suitability, convenience, advantage". The Latin word ''
commodus Commodus (; 31 August 161 – 31 December 192) was a Roman emperor The Roman emperor was the ruler of the Roman Empire The Roman Empire ( la, Imperium Rōmānum ; grc-gre, Βασιλεία τῶν Ῥωμαίων, Basileía tôn R ...

commodus
'' (from which English gets other words including ''commodious'' and ''accommodate'') meant variously "appropriate", "proper measure, time, or condition", and "advantage, benefit".


Description


Characteristics

In economics, the term ''commodity'' is used specifically for
economic goods In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...
that have full or partial but substantial
fungibility In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of good ...
; that is, the market treats their instances as equivalent or nearly so with no regard to who produced them. Karl Marx described this property as follows: "From the taste of
wheat Wheat is a grass widely cultivated for its seed, a cereal grain which is a worldwide staple food. The many species of wheat together make up the genus ''Triticum''; the most widely grown is common wheat Common wheat (''Triticum aestivum'' ...

wheat
, it is not possible to tell who produced it, a Russian serf, a French peasant or an English
capitalist Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, a price s ...
."
Petroleum Petroleum, also known as crude oil and oil, is a naturally occurring, yellowish-black liquid A liquid is a nearly incompressible In fluid mechanics or more generally continuum mechanics, incompressible flow (isochoric process, isoc ...

Petroleum
and
copper Copper is a chemical element In chemistry, an element is a pure Chemical substance, substance consisting only of atoms that all have the same numbers of protons in their atomic nucleus, nuclei. Unlike chemical compounds, chemical elem ...

copper
are examples of commodity goods: their supply and demand are a part of one universal market. Non-commodity items such as
stereo File:Carsoundstereoshift.png, Time difference in a stereophonic recording of a car going past, 250px Stereophonic sound or, more commonly, stereo, is a method of sound reproduction that recreates a multi-directional, 3-dimensional audible per ...

stereo
systems have many aspects of product differentiation, such as the
brand A brand is a name, term, design, symbol or any other feature that identifies one seller's good or service as distinct from those of other sellers. Brands are used in business Business is the activity of making one's living or making mon ...

brand
, the user interface and the perceived quality. The demand for one type of stereo may be much larger than demand for another. The price of a commodity good is typically determined as a function of its market as a whole. Well-established physical commodities have actively traded
spot Spot or SPOT may refer to: Places * Spot, North Carolina, a community in the United States * The Spot, New South Wales, a locality in Sydney, Australia * South Pole Traverse, sometimes called the South Pole Overland Traverse People * SPOT (produc ...
and
derivative In mathematics Mathematics (from Greek: ) includes the study of such topics as numbers (arithmetic and number theory), formulas and related structures (algebra), shapes and spaces in which they are contained (geometry), and quantities ...
markets.


Hard and soft commodities

Soft commoditiesSoft commodities, or softs, are commodities In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Co ...
are goods that are grown, such as
wheat Wheat is a grass widely cultivated for its seed, a cereal grain which is a worldwide staple food. The many species of wheat together make up the genus ''Triticum''; the most widely grown is common wheat Common wheat (''Triticum aestivum'' ...

wheat
, or
rice Rice is the seed A seed is an embryonic ''Embryonic'' is the twelfth studio album by experimental rock band the Flaming Lips released on October 13, 2009, on Warner Bros. Records, Warner Bros. The band's first double album, it was relea ...

rice
. Hard commodities are . Examples include
gold Gold is a chemical element In chemistry, an element is a pure Chemical substance, substance consisting only of atoms that all have the same numbers of protons in their atomic nucleus, nuclei. Unlike chemical compounds, chemical elemen ...

gold
,
silver Silver is a chemical element In chemistry, an element is a pure Chemical substance, substance consisting only of atoms that all have the same numbers of protons in their atomic nucleus, nuclei. Unlike chemical compounds, chemical ele ...

silver
,
helium Helium (from el, ἥλιος, helios Helios; Homeric Greek: ), Latinized as Helius; Hyperion and Phaethon are also the names of his father and son respectively. often given the epithets Hyperion ("the one above") and Phaethon ("the shining" ...

helium
, and
oil An oil is any nonpolar In chemistry Chemistry is the science, scientific study of the properties and behavior of matter. It is a natural science that covers the Chemical element, elements that make up matter to the chemical compound ...

oil
. Energy commodities include electricity, gas,
coal Coal is a combustible , Germany ) , image_map = , map_caption = , map_width = 250px , capital = Berlin , coordinates = , largest_city = capital , languages_type = Official language , languages = German language, German , ...

coal
and oil. Electricity has the particular characteristic that it is usually uneconomical to store, and must therefore be consumed as soon as it is produced.


Commoditization

Commoditization In business literature, commoditization is defined as the process by which goods In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distrib ...
occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the
intellectual capitalIntellectual capital is the result of mental processes that form a set of intangible objects that can be used in economic activity and bring income to its owner (organization), covering the competencies of its people (human capital), the value relati ...
necessary to acquire or produce it efficiently. As such, goods that formerly carried premium margins for
market Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finland and Sweden Art, entertainment, and media Films *Market (1965 film), ''Market'' (1965 ...
participants Participation or Participant may refer to: Politics *Participation (decision making), mechanisms for people to participate in social decisions *Civic participation, engagement by the citizens in government *e-participation, citizen participation ...
have become commodities, such as generic pharmaceuticals and DRAM chips. An article in ''
The New York Times ''The New York Times'' is an American daily newspaper based in New York City with a worldwide readership. Founded in 1851, the ''Times'' has since won List of Pulitzer Prizes awarded to The New York Times, 132 Pulitzer Prizes, the most of a ...

The New York Times
'' cites
multivitamin A multivitamin is a preparation intended to serve as a dietary supplement A dietary supplement is a manufactured product intended to supplement one's diet by taking a pill, capsule, tablet, powder or liquid. A supplement can provide nut ...
supplements as an example of commoditization; a 50 mg tablet of
calcium Calcium is a chemical element In chemistry, an element is a pure Chemical substance, substance consisting only of atoms that all have the same numbers of protons in their atomic nucleus, nuclei. Unlike chemical compounds, chemical elem ...

calcium
is of equal value to a consumer no matter what company produces and markets it, and as such, multivitamins are now sold in bulk and are available at any supermarket with little brand differentiation. Following this trend,
nanomaterials * Nanomaterials describe, in principle, material A material is a substance Substance may refer to: * Substance (Jainism), a term in Jain ontology to denote the base or owner of attributes * Chemical substance, a material with a definite chemic ...

nanomaterials
are emerging from carrying premium profit margins for market participants to a status of commodification. There is a spectrum of commoditization, rather than a binary distinction of "commodity versus differentiable product". Few products have complete undifferentiability and hence fungibility; even electricity can be differentiated in the market based on its method of generation (e.g., fossil fuel, wind, solar), in markets where energy choice lets a buyer opt (and pay more) for renewable methods if desired. Many products' degree of commoditization depends on the buyer's mentality and means. For example, milk, eggs, and notebook paper are not differentiated by many customers; for them, the product is fungible and lowest price is the main decisive factor in the purchasing choice. Other customers take into consideration other factors besides price, such as environmental sustainability and animal welfare. To these customers, distinctions such as "
organic Organic may refer to: * Organic, of or relating to an organism, a living entity * Organic, of or relating to an anatomical organ (anatomy), organ Chemistry * Organic matter, matter that has come from a once-living organism, is capable of decay or ...

organic
versus not" or " cage free versus not" count toward differentiating brands of milk or eggs, and percentage of recycled content or
Forest Stewardship Council The Forest Stewardship Council (FSC) is an international non-profit A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a col ...
certification Certification is the formal attestation or confirmation of certain characteristics of an object, person, or organization. This confirmation is often, but not always, provided by some form of external review, education, assessment, or audit ...
count toward differentiating brands of notebook paper.


Global commodities trading company

This is a list of companies trading globally in commodities, descending by size as of October 28, 2011. #
Vitol Vitol is a Dutch energy and commodity trading company that was founded in Rotterdam in 1966 by Henk Viëtor and Jacques Detiger. Though physical trading, logistics and distribution are at the core of the business, these are complemented by refinin ...
# Glencore International AG #
Trafigura Trafigura Group Pte. Ltd. is a Singaporean multinational commodity trading company founded in 1993 that trades in base metals and energy. It is legally registered and headquartered in Singapore Singapore (), officially the Republic of ...
#
Cargill Cargill, Incorporated is an American Privately held company, privately held global food corporation based in Minnetonka, Minnesota, Minnetonka, Minnesota, and incorporated in Wilmington, Delaware. Founded in 1865, it is the largest privately ...
# Salam Investment #
Archer Daniels Midland The Archer-Daniels-Midland Company, commonly known as ADM, is an American multinational food processing Food processing is the transformation of agricultural products into food, or of one form of food into other forms. Food processing incl ...
#
Gunvor (company) Gunvor Group Ltd is a Cypriot-domiciled multinational commodity trading company registered in Cyprus Cyprus ; tr, Kıbrıs (), officially called the Republic of Cyprus,, , lit: Republic of Cyprus is an island nation in the eastern Med ...
# Mercuria Energy Group #
Noble Group Noble Group Holdings Limited (commonly known as Noble) is a commodity trader based in Hong Kong. It trades energy products and industrial raw materials. Its predecessor, Noble Group Ltd was embroiled in an accounting fraud controversy started in ...
#
Louis Dreyfus Group Louis Dreyfus Company B.V. (LDC), also called the Louis-Dreyfus Group, is a global merchant firm that is involved in agriculture Agriculture is the science, art and practice of cultivating plants and livestock. Agriculture was the key devel ...
#
Bunge Limited Bunge Limited is an American agribusiness and food company, incorporated in Bermuda ) , anthem = "God Save the Queen" , song_type = Unofficial territorial song , song = "Hail to Bermuda" , image_map = , map_caption = , image_map2 ...
#
Wilmar International Wilmar International Limited (); is a Singapore Singapore (), officially the Republic of Singapore, is a sovereign state, sovereign island city-state in maritime Southeast Asia. It lies about one degree of latitude () north of the equator, o ...
#
Olam International Olam International is a major food and agri-business company, operating in 60 countries and supplying food and industrial raw materials to over 19,800 customers worldwide. Olam is among the world's largest suppliers of cocoa beans and products, ...


Commodity trade

In the original and simplified sense, ''commodities'' were things of value, of uniform quality, that were produced in large quantities by many different producers; the items from each different producer were considered equivalent. On a commodity exchange, it is the underlying standard stated in the contract that defines the commodity, not any quality inherent in a specific producer's product.
Commodities exchange A commodities exchange is an exchange Exchange may refer to: Places United States * Exchange, Indiana Exchange is an Unincorporated area, unincorporated community in Green Township, Morgan County, Indiana, Green Township, Morgan County, India ...
s include: * Bourse Africa (formerly GBOT) *
Bursa Malaysia Bursa Malaysia is the stock exchange of Malaysia. It is in Kuala Lumpur , anthem = ''Maju dan Sejahtera'' , image_map = , map_caption = , pushpin_map = Malaysia#Southeast Asia#As ...

Bursa Malaysia
Derivatives (MDEX) *
Chicago Board of Trade The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange The Chicago Mercantile Exchange (CME) (often ca ...

Chicago Board of Trade
(CBOT) *
Chicago Mercantile Exchange The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an a ...

Chicago Mercantile Exchange
(CME) *
Dalian Commodity Exchange The Dalian Commodity Exchange (DCE) () is a Chinese futures exchange based in Dalian Dalian is a major sub-provincial port city in Liaoning province, People's Republic of China China, officially the People's Republic of China (PRC), ...
(DCE) * Euronext.liffe (
LIFFE Image:LIFFE_Trader.JPG, thumbnail, LIFFE Trader opposite Cannon Street station. The London International Financial Futures and Options Exchange (LIFFE, pronounced 'life') was a futures exchange based in London. In 2014, following a series of t ...
) *
Kansas City Board of Trade Kansas City Board of Trade, on West 48th Street (2008) The Kansas City Board of Trade (KCBT), was an American commodity In economics Economics () is the social science that studies how people interact with value; in particular, the Pr ...
(KCBT) *
London Metal Exchange The London Metal Exchange (LME) is the futures exchange with the world's largest market in options and futures contract In finance Finance is the study of financial institutions, financial markets and how they operate within the financial sy ...
(LME) * Marché à Terme International de France (MATIF) * Mercantile Exchange Nepal Limited (MEX) *
Multi Commodity Exchange Multi Commodity Exchange of India Ltd (MCX) () is an independent Indian Government of India, government owned commodity exchange based in India. It was established in 2003 by the Government of India and is currently based in Mumbai . It is India ...
(MCX) * National Commodity and Derivatives Exchange (NCDEX) * National Commodity Exchange Limited (NCEL) *
New York Mercantile Exchange The New York Mercantile Exchange (NYMEX) is a commodity futures exchange owned and operated by CME Group of Chicago. NYMEX is located at One North End Avenue in Brookfield Place (New York City), Brookfield Place in the Battery Park City section ...

New York Mercantile Exchange
(NYMEX) Markets for trading commodities can be very efficient, particularly if the division into pools matches demand segments. These markets will quickly respond to changes in
supply and demand In microeconomics Microeconomics is a branch of that studies the behavior of individuals and in making decisions regarding the allocation of and the interactions among these individuals and firms. Microeconomics focuses on the study ...

supply and demand
to find an
equilibrium List of types of equilibrium, the condition of a system in which all competing influences are balanced, in a wide variety of contexts. Equilibrium may also refer to: Film and television * Equilibrium (film), ''Equilibrium'' (film), a 2002 scien ...
price A price is the (usually not negative) quantity Quantity is a property that can exist as a multitude or magnitude, which illustrate discontinuity and continuity. Quantities can be compared in terms of "more", "less", or "equal", or by ...

price
and quantity. In addition, investors can gain passive exposure to the commodity markets through a
commodity price index A commodity price index is a fixed-weight index or (weighted) average of selected commodity prices, which may be based on spot or futures prices. It is designed to be representative of the broad commodity asset class or a specific subset of commodit ...
. In order to diversify their investments and mitigate the risks associated with
inflation In economics, inflation refers to a general progressive increase in prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a r ...

inflation
ary debasement of currencies,
pension fund A pension fund, also known as a superannuation fund in some countries, is any plan, fund, or scheme which provides pension, retirement income. Pension funds typically have large amounts of money to invest and are the major investors in listed an ...
s and
sovereign wealth fund A sovereign wealth fund (SWF), sovereign investment fund, or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, Bond (finance), bonds, real estate, precious metals, or in alternative inve ...
s allocate capital to non-listed assets such as a commodities and commodity-related infrastructure.


Inventory data

The
inventory Inventory (American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of varieties of the English language native to the United States. Currently, American English ...
of commodities, with low inventories typically leading to more volatile future prices and increasing the risk of a "
stockout A stockout, or out-of-stock (OOS) event is an event that causes inventory Inventory (American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of varieties of the ...
" (inventory exhaustion). According to economist theorists, companies receive a
convenience yield A convenience yield is an implied return on holding inventories. It is an adjustment to the cost of carry The cost of carry or carrying charge is cost of storing a physical commodity In economics Economics () is the social science that ...
by holding inventories of certain commodities. Data on inventories of commodities are not available from one common source, although data is available from various sources. Inventory data on 31 commodities was used in a 2006 study on the relationship between inventories and commodity futures risk premiums.


Commodification of labor

In classical political economy and especially in
Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher A philosopher is someone who practices philosophy Philosophy (from , ) is the study of general and fundamental questions, such as those about reason, M ...

Karl Marx
's
critique of political economy ''Das Kapital'', also known as ''Capital: A Critique of Political Economy'' (german: Das Kapital. Kritik der politischen Ökonomie, ; 1867–1883), is a foundational theoretical text in Historical materialism, materialist philosophy, economics a ...
, a commodity is an object or a good or service ("product" or "activity") produced by human labour. Objects are external to man. However, some objects attain "
use value Use value (german: Gebrauchswert) or value in use is a concept in classical political economy and Marxian economics. It refers to the tangible features of a commodity (a tradeable object) which can satisfy some human requirement, want or need, or w ...
" to persons in this world, when they are found to be "necessary, useful or pleasant in life". "Use value" makes an object "an object of human wants", or "a means of subsistence in the widest sense". As society developed, people found that they could trade goods and services for other goods and services. At this stage, these goods and services became "commodities". According to Marx, commodities are defined as objects which are offered for sale or are "exchanged in a market". In the marketplace, where commodities are sold, "use value" is not helpful in facilitating the sale of commodities. Accordingly, in addition to having use value, commodities must have an "exchange value"—a value that could be expressed in the market. Prior to Marx, many economists debated as to what elements made up exchange value.
Adam Smith Adam Smith ( 1723 – 17 July 1790) was a Scottish economist, philosopher as well as a moral philosopher Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and ...

Adam Smith
maintained that exchange value was made up of
rent Rent may refer to: Economics *Renting Renting, also known as hiring or letting, is an agreement where a payment is made for the temporary use of a good, service or owned by another. A is when the pays a flat rental amount and the pays ...
,
profit Profit may refer to: Business and law * Profit (accounting) Profit, in accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic ...
,
labour Labour or labor may refer to: * Childbirth Childbirth, also known as labour or delivery, is the ending of pregnancy where one or more babies leaves the uterus by passing through the vagina or by Caesarean section. In 2015, there were about 13 ...
and the costs of wear and tear on the instruments of husbandry.
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, one of the most influential of the classical economists along with Thomas Malthus Thomas Robert Malthus (; 13/14 February 1766 – 23 December 1834) w ...

David Ricardo
, a follower of Adam Smith, modified Smith's approach on this point by alleging that labour alone is the content of the exchange value of any good or service. While maintaining that all exchange value in commodities was derived directly from the hands of the people that made the commodity, Ricardo noted that only part of the exchange value of the commodity was paid to the worker who made the commodity. The other part of the value of this particular commodity was labour that was not paid to the worker—unpaid labour. This unpaid labour was retained by the owner of the means of production. In capitalist society, the capitalist owns the means of production and therefore the unpaid labour is retained by the capitalist as rent or as profit. The means of production means the site where the commodity is made, the raw products that are used in the production and the instruments or machines that are used for the production of the commodity. However, not all commodities are reproducible nor were all commodities originally intended to be sold in the market. These priced goods are also treated as commodities, e.g. human labour-power, works of art and natural resources ("earth itself is an instrument of labour"), even though they may not be produced specifically for the market, or be non-reproducible goods. Marx's analysis of the commodity is intended to help solve the problem of what establishes the
economic value In economics Economics () is a social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the beh ...
of goods, using the
labor theory of value The labor theory of value (LTV) is a theory of value that argues that the economic value In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), produc ...
. This problem was extensively debated by
Adam Smith Adam Smith ( 1723 – 17 July 1790) was a Scottish economist, philosopher as well as a moral philosopher Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and ...

Adam Smith
,
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, one of the most influential of the classical economists along with Thomas Malthus Thomas Robert Malthus (; 13/14 February 1766 – 23 December 1834) w ...

David Ricardo
and Karl Rodbertus-Jagetzow among others. All three of the above-mentioned economists rejected the theory that labour composed 100% of the exchange value of any commodity. In varying degrees, these economists turned to supply and demand to establish the price of commodities. Marx held that the "price" and the "value" of a commodity were not synonymous. Price of any commodity would vary according to the imbalance of supply to demand at any one period of time. The "value" of the same commodity would be consistent and would reflect the amount of labour value used to produce that commodity. Prior to Marx, economists noted that the problem with using the "quantity of labour" to establish the value of commodities was that the time spent by an unskilled worker would be longer than the time spent on the same commodity by a skilled worker. Thus, under this analysis, the commodity produced by an unskilled worker would be more valuable than the same commodity produced by the skilled worker. Marx pointed out, however, that in society at large, an average amount of time that was necessary to produce the commodity would arise. This average time necessary to produce the commodity Marx called the "socially necessary labour time". Socially necessary labour time was the proper basis on which to base the "exchange value" of a given commodity.


Commodity Super Cycle

Commodity Super Cycles are periods of times, around a decade where commodities as a whole trade at a price that is greater than their long term
Moving average In statistics, a moving average (rolling average or running average) is a calculation to analyze data points by creating a series of averages of different subsets of the full data set. It is also called a moving mean (MM) or rolling mean and is ...
. A Super Cycle will usually occur when there is large industrial and commercial change in a country or world that requires more resources to support the change. As prices rise goods and services that rely on commodities rise with them.


History of Super Cycles

There have been four super cycles over the last 120 years worldwide. The first commodity super cycle started in late 1890 and was accelerated on the back of widespread U.S. industrialization and World War 1. In 1917 commodity prices peaked and then entered a downtrend to the 1930s. As war erupted in Europe in the late 1930s and eventually including the U.S. the world saw a new cycle begin. Countries were not just preparing for war but also the
Aftermath of World War II The aftermath of World War II was the beginning of a new era for all countries involved, defined by the decline of all European colonial empires and simultaneous rise of two superpowers: the Soviet Union The Soviet Union,. officially the Un ...
as lots of Europe and Asia faced heavy rebuilding. This cycle eventually peaked in 1951 and faded away in the early 70s. In the 1970s as world economies grew they needed more materials and energy to support expansion leading to increases in prices across the board. This boom came to an end as foreign investments fled as extractive industries became nationalized. The most recent of commodity super cycles began in 2000 as China joined the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization An intergovernmental organization (IGO) is an organization composed primarily of sovereign states (referred to as ''member states''), or of other organizations through ...
. China was also in the beginning of their boom as industry and expansion took off. Workers moved into cities as emerging industries took off and offered a lots of new jobs and oppurtunities. In 2008 when the
Great Recession The Great Recession was a period of marked general decline (recession In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution ( ...
hit it put a halt onto the supercycle as GDP's across the world tanked leaving many economies in recessions. The next or the fifth supercycle could arrive as the world enters the final phases of the Covid-19 pandemic and starts to build massive clean energy infrastructure in view of the commodity price increase.


See also

*
2000s commodities boom The 2000s commodities boom or the commodities super cycle was the rise of many physical commodity In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), pro ...
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Commercial off-the-shelf Commercial off-the-shelf or commercially available off-the-shelf (COTS) products are packaged or canned (ready-made) hardware or software, which are adapted aftermarket to the needs of the purchasing organization, rather than the commissioning of ...
or "commercially available off-the-shelf" (COTS) *
Commodification Within a capitalist Capitalism is an economic system An economic system, or economic order, is a system of Production (economics), production, allocation of resources, resource allocation and Distribution (economics), distribution of go ...
*
Commodity (Marxism) In classical political economy and especially Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, economist, historian, sociologist, political theorist, journalist and socialist revolutionary. Born in Trie ...
* Commodity currency *
Commodity fetishism In Karl Marx's critique of political economy, commodity fetishism is the perception of certain relationships (especially production and exchange) not as relationships among people, but as social relationships among things (the money and commodit ...
* Commodity market risk and values *
Commodity money Commodity money is money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main functions of m ...
* Commodity price shocks *
Commodity price index A commodity price index is a fixed-weight index or (weighted) average of selected commodity prices, which may be based on spot or futures prices. It is designed to be representative of the broad commodity asset class or a specific subset of commodit ...
*
List of traded commodities The following is a list of Futures contracts on physically traded commodity, commodities. Agricultural Grains, food and fiber Symbol from "CME Group Website". cmegroup.com. CME Group. Retrieved 2010-10-20. Livestock and meat Energy For ...
* Sample grade *
Standardization Standardization or standardisation is the process of implementing and developing technical standards based on the consensus of different parties that include firms, users, interest groups, standards organizations and governments. Standardization ...
*
Trade Trade involves the transfer of goods from one person or entity to another, often in exchange for money. Economists refer to a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of r ...

Trade


Notes


External links


Pricing in Electricity Markets: A Mean Reverting Jump Diffusion Model with SeasonalityCollection of current and historical commodities data
from
United Nations Human Rights CouncilConceptual problems in commodity regulation
{{Authority control * Business terms