Basic commodities

They are the products and services that people need on a daily and basic basis to meet their basic life needs. These needs change across cultures and economic circumstances, but in general, the concept of basic goods includes things that people consider essential to live and thrive.

A commodity market is a market in which basic goods and services that people need to meet their daily life needs are traded and exchanged. This market includes a wide range of basic goods such as food, drink, shelter, clothing, health care, and transportation, and is characterized by the fact that these goods have constant demand over time.

Several factors affect commodity prices, including:

  • Supply and Demand: The price of commodities is affected by the laws of supply and demand. Increased demand or decreased supply can lead to price changes.
  • Economic conditions: In economic recessions, spending on consumer goods may decrease, while the need for them increases in economic growth.
  • Inflation: Inflation may cause the prices of goods to rise, affecting the ability of individuals to purchase them.
  • Government Policies: Government decisions on taxes, subsidies, and trade policies play an important role in shaping the commodity market.
  • Technology and Innovation: Technological advances can lead to improved production and distribution of goods, affecting their availability and prices.
  • Natural Disasters and Crises: Natural disasters and economic or health crises can affect the supply and prices of basic commodities.

Trade in commodities plays a vital role in economic development and social stability. Among the impacts that may occur as a result of commodity trade and its impact on development:

  •  Enhancing agricultural productivity: Trade can contribute to improving agricultural productivity by exchanging effective technologies and practices. This leads to increased yields and improved food quality.
  •  Promoting economic diversification: Commodity trade can enhance economic diversification by expanding areas of production and exchange, and this reduces economic orientation towards one sector.
  •  Promoting international trade: The export and import of basic goods contributes to enhancing international trade, and is an important part of global economic integration.
  •  Securing food supplies: Trade in basic commodities can contribute to providing food supplies and enhancing food security in countries.
  •  Increase national income: Exporting basic goods can increase a country's income and improve the balance of payments.
  •  Improving infrastructure: Increased commercial activity may stimulate governments to develop infrastructure such as roads and ports, which enhances economic development.
  •  Social impacts: Trade can contribute to improving social conditions by providing job opportunities and improving living standards.

Investing in commodities can provide several benefits to investors, including:

  • Portfolio diversification: Investing money in commodities is one of the methods of portfolio diversification, as it has movements independent of the stock and bond markets. This can help reduce potential risks.
  • Protection against inflation: Some commodities, especially those related to food and energy, can be resistant to the effects of inflation. When inflation increases, the price of these goods rises, which can act as a protection against loss of purchasing power.
  • Earning returns in low interest periods: Sometimes, commodities can be an attractive source of return when interest rates are low, as investors look for opportunities to achieve higher returns.
  • Benefit from global population growth and demand: As the global population grows, the demand for commodities such as food and energy increases. Investing money in these sectors can reflect the growing demand.
  • Protection against adverse economic conditions: Historically, some commodities have shown relative resistance to negative economic fluctuations, with demand for commodities remaining even in periods of economic downturn.
  • Achieving investment returns: Some commodities may be a source of good investment returns, especially if there is an increase in demand or a lack of supply.

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