SS1 Second Term Commerce Lesson Note – Commodity Exchange

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WEEK 10

SUBJECT: COMMERCE

CLASS: SS1

TOPIC: COMMODITY EXCHANGE

CONTENT:

1. Meaning of Commodity
2. Types of commodity – Agricultural produce, solid minerals, oil and gas.
3. Meaning of commodity exchange
4. (d) tradable commodity (e) Requirement for trading (i) Grading system (ii) Warehousing (iii) Clearing system (iv) Standardizing
5. Types of commodity exchange – Spot and forward futures (i) Method of trading. (ii) Open outcry

SUB-TOPIC 1: MEANING OF COMMODITY

Commodity is any good or material produced to satisfy wants or needs. Commodities may also be defined as materials or products that can be traded or exchanged for value at a particular time and at a pre-determined price. Any material or anything regarded as commodity must possess standard quality and price. For instance, gold, silver are commodities because they have standardized quality and price which are objective and are determined in line with local or international standard. Commodity is used to describe a class of goods for which there is demand but which is supplied without qualitative differentiation across a market.

However, gold jewellery is not a commodity because the price is subjective depending on factors such as design, period of sale, etc.

TYPES OF COMMODITY

Commodities are basically classified or divided into three categories.

1. Agricultural Produce: these are goods that are grown or cultivated for human consumption. They include food crops, cash crops and livestock which are traded or exchanged at a pre-determined price and graded quality. Cash crops are sold in international market based on certain standardized price and quality. Another name for agricultural produce are soft commodities. Examples are beans, wheat, sugar, coffee etc.
2. Solid Minerals: They are basically solid materials which are extracted thorough mining. They include natural or mineral resources which can be sold in the local market or international

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