Commodities
Raw materials or primary agricultural products that are interchangeable with other goods of the same type, traded on exchanges.
What is Commodities?
Commodities are raw materials or primary products — including energy (crude oil, natural gas), metals (gold, silver, copper), agricultural products (wheat, corn, soybeans), and livestock — that are largely interchangeable with other goods of the same type (fungible) and traded on organized exchanges. Because commodities are physical goods, their prices are driven by supply and demand fundamentals: weather, geopolitics, production levels, and global economic growth. Investors gain commodity exposure through futures contracts, commodity ETFs, stocks of commodity producers (mining, oil companies), and physical ownership. Commodities can act as an inflation hedge in portfolios and tend to have low correlation with stocks and bonds, though they are highly volatile.
Example
Russia's invasion of Ukraine in February 2022 disrupted global wheat, corn, and sunflower oil supplies (Ukraine supplies ~12% of global wheat and ~50% of sunflower oil). Combined with energy supply disruptions from Russian gas cutoffs, global commodity prices surged — wheat hit 14-year highs, and Europe faced an energy crisis — demonstrating how geopolitical events create rapid commodity price shocks.