In the capital markets, commodities are the only physical assets that can be bought and sold on an exchange. They are typically extracted from the earth or sourced from the ocean, forming the very beginning of the supply chain. These raw materials are then sold at higher value to producers, manufacturers, and retailers before ultimately reaching consumers.
Commodities are generally produced in large quantities and standardized to ensure consistent quality and volume. As a result, their prices remain uniform regardless of who the producer is. Commodities—such as oil, corn, and copper—are traded on commodity exchanges, where their prices fluctuate daily and often display high volatility.