What makes something a commodity

By the end you will be able to

• Explain how grades, fungibility and price discovery make a good a commodity, and identify where those conditions break down.
• Distinguish hard from soft commodities and describe what each of the table's families has in common.
• Analyse how storability, supply lags, recycling, substitution, by-product status and value per kilogram shape a commodity's prices and trade.
• Assess why primary commodities matter to the world economy and why heavy dependence on one commodity is risky for exporters.
• Outline how commodity markets evolved from early rice and grain futures to the LME and the oil benchmarks.
• Interpret a tile's HHI, by-product share, EU supply risk, recycling input rate and reserve life, and combine them into a diagnosis.

Contents

1. Part 1 What turns a good into a commodity

   Wheat, copper and crude oil look nothing alike, yet they share a market form: a buyer asks for a grade, a quantity, a place and a date, never a brand. This part explains how that form is built, from specifications and interchangeable units to a price discovered in one place and borrowed everywhere, and where it frays.

   • A commodity is bought by description, not by maker
   • Grades are built, and every price refers to one
   • Price discovery: one market sets the number everyone uses
   • Where the definition blurs
2. Part 2 Hard, soft and the fifteen families

   The table groups its commodities into fifteen families. The grouping is not cosmetic: goods in one family tend to share substitutes, supply constraints and ways of being priced, so their prices often move together. This part starts with the oldest split in the trade, hard against soft, then sets out what each family shares.

   • Hard and soft: grown and mined goods are shocked from different sides
   • Families group goods that share substitutes and constraints
   • What each family has in common
3. Part 3 The economics the families share

   A handful of traits explain most of how a commodity market behaves: whether the good stores, when it is produced, how fast supply and demand respond, whether it is a by-product, and how much value it packs into a tonne. Each leaves a fingerprint on prices and trade.

   • Storage, perishability and seasons decide how far stocks can smooth prices
   • How fast supply and demand can respond
   • By-products: supply that ignores its own price
   • Value per kilogram decides whether a price is global, regional or local
4. Part 4 Why commodities matter, and how their markets grew

   Primary commodities are a small and shrinking share of rich economies, yet no economy runs without them, and for some poor countries one commodity is most of what they sell abroad. This part sizes the markets, examines the risks of dependence, and traces briefly how modern market institutions arose.

   • A shrinking share of output, an indispensable input
   • Commodity dependence: when one export is most of an economy
   • A short history: from rice brokers to Brent
5. Part 5 How to read a tile

   Each tile carries a few compressed numbers: producer concentration, by-product share, EU supply risk and importance, recycling input rate and reserve life. Two more colour modes, critical-list count and five-year price change, need no decoding. This part explains how each is built and what it cannot tell you, then reads three tiles end to end.

   • Producer concentration: the HHI squares the shares
   • By-product share and EU supply risk
   • Recycling input and reserve life
   • Reading three tiles end to end: copper, gallium and cocoa
6. Wrap-up Key terms, try it in the table, final quiz, sources