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Commodities: A Comprehensive Guide

Commodities play a crucial role in the global economy, serving as essential raw materials for various industries. In this guide, we will explore what commodities are, typical examples, how and where they are traded, ways to get exposure to commodities, and the cyclical nature of commodity markets.

What Are Commodities?

Commodities are tangible goods that are interchangeable with other goods of the same type regardless of quality or supplier. They are the building blocks of the economy, representing essential resources used in manufacturing and production processes. Commodities can be broadly categorized into two types: hard commodities and soft commodities.


Figure 1: Commodities (source: Craiyon)

Typical Commodities

Commodities cover a vast array of goods that are traded globally. Here are some typical examples:

How and Where Commodities are Traded

Commodities are traded on various financial markets, providing opportunities for investors and producers to manage their exposure to price fluctuations. The primary platforms for commodity trading include:

  1. Commodity Exchanges: These are centralized marketplaces where buyers and sellers come together to trade standardized contracts. Examples include the Chicago Mercantile Exchange (CME) and the London Metal Exchange (LME).
  2. Over-the-Counter (OTC) Markets: Some commodities are traded directly between parties in decentralized markets. OTC trading is common for customized or non-standardized contracts.

How to Get Exposure to Commodities

Investors can gain exposure to commodities through various financial instruments. Here are common ways to invest in commodities:

Largest Commodity Stocks

Below are 20 examples of the largest commodity stocks, sorted alphabetically by company name:

Company Country Type of Commodity
Anglo American United Kingdom Mining (Various)
Archer Daniels Midland United States Agricultural Trading
BASF SE Germany Chemicals
BHP Group Australia Mining (Various)
Cargill United States Agricultural Trading
Chevron Corporation United States Oil and Gas
Exelon Corporation United States Electricity
Exxon Mobil Corporation United States Oil and Gas
Freeport-McMoRan United States Mining (Copper)
Glencore Switzerland Commodities Trading
Mitsubishi Corporation Japan Various
Occidental Petroleum United States Oil and Gas
PetroChina China Oil and Gas
Rio Tinto Australia Mining (Various)
RWE AG Germany Electricity
Shell Netherlands Oil and Gas
Sinopec China Oil and Gas
Vale Brazil Mining (Iron Ore)

If you are interested in precious metals stocks, you can find gold stocks and silver stocks here.

Commodity Cycles

Commodity markets often experience cyclical patterns influenced by various factors, including supply and demand dynamics, geopolitical events, and economic trends. Understanding commodity cycles is crucial for investors looking to navigate these markets successfully.

The typical phases of a commodity cycle include:

  1. Boom: Increasing demand and limited supply lead to rising prices, attracting more investment.
  2. Bust: Excess supply, changing economic conditions, or geopolitical events can trigger a downturn, causing prices to fall.
  3. Recovery: After a downturn, prices stabilize, and the market begins to recover as supply and demand find a new equilibrium.
  4. Expansion: Growing demand and limited supply contribute to a new boom phase, restarting the cycle.

Investors should carefully monitor market trends and factors influencing commodity prices to make informed decisions throughout these cycles.

Commodities as Inflation Hedge

Commodities are often considered a valuable hedge against inflation. In times of rising prices, the real value of money diminishes, but the prices of many commodities tend to increase. Here's how commodities serve as an inflation hedge:

Investors often allocate a portion of their portfolios to commodities to mitigate the impact of inflation and preserve the real value of their investments.

Returns and Risk Levels Compared to Stocks, Bonds, etc.

Commodities offer unique opportunities and risks compared to traditional financial instruments like stocks and bonds. Understanding these factors is crucial for investors seeking diversification. Here's a comparison of returns and risk levels:

Investors should carefully assess their risk tolerance and investment goals when considering commodities as part of their portfolio, recognizing both the potential returns and the associated volatility.


Commodities are a vital component of the global economy, and understanding their nature, trading mechanisms, and investment opportunities is essential for anyone looking to navigate the complexities of commodity markets.

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Based on the original Czech article: Komodity.