Commodity

Commodities are bulk goods and raw materials, such as grains, metals, livestock, oil, cotton, coffee, sugar, and cocoa, that are used to produce consumer products.

The term also describes financial products, such as currency or stock and bond indexes.

Commodities are bought and sold on the cash market, and they are traded on the futures exchanges in the form of futures contracts.

Commodity prices are driven by supply and demand. When a commodity is plentiful -- tomatoes in August, for example -- prices are comparatively low. When a commodity is scarce because of a bad crop or because it is out of season, the price will generally be higher.

You can buy options on many commodity futures contracts to participate in the market for less than it might cost you to buy the underlying futures contracts. You can also invest through commodity funds.