A commodity is a good for which there is demand, often consisting of raw or primary products. These raw commodities are traded regularly on commodities exchanges, in which they are bought and sold in regulated contracts. Some examples of commodities are petroleum, milk and paper. Well-established physical commodities actively trade against spot as well as derivative markets. These are generally agricultural products such as corn, coffee, soybean and more just to name a few.
Markets for trading commodities can be very efficient, quickly responding to changes in supply and demand in order to maintain balance between prices and availability.
Because commodities can take so many different physical forms, the financial market classifies them as a group based on their universal value and how they are traded. However, commodities trading is not limited to simple exchanges. An entire set of complex trading rules, including speculation on so-called futures and CFD's, keeps the market active.
Commodities markets have seen a surge in the level of trading throughout the recent decade. Global physical exports of commodities increased by 17%, whilst the value of commodity OTC (over the counter) derivatives increased more than 500% and commodity derivative trading on exchanges more.