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Commodities: A Resource Guide

Economic Analysis of Commodities

Carol M. Highsmith, photographer. Grain elevator and railroad hopper cars in Oxford, Pennsylvania A hopper is a type of railroad freight car used to transport loose bulk commodities such as coal, ore, grain, and track ballast. March 28, 2019. Library of Congress Prints and Photographs Division.

Commodities are consumable or transferable assets that provide utility in their consumption or in their use in manufacturing. The supply of commodities is limited in any given period; even renewable resources, such as grains, are available in only a limited amount at each harvest. As an asset class commodities are heterogenous in that each commodity has its own very specific properties. Storability, which has a cost, and renewability are also important features that distinguish various commodities and that are important in determining price. While commodities are neither capital nor store-of-value assets, gold is an exception in that it can behave as both a store of value like antiquities or can earn a stream of income when leased.

Because commodity producers react slowly to market distortions, price movements are the only means by which markets can respond to short-term supply and demand shocks. In addition to price fluctuations, both commodity producers and consumers must deal with market risks such as global financial crises or exchange rate fluctuations; credit risks such as the failure of a counterparty to meet its obligations; business risks such as failure to discover new reserves or a sudden reduction in demand; and legal risks from incidents or government action; liquidity risks such as an increased cost or even the loss of funds for a planned investment; or operational risks such as a significant breaches of IT security or destruction of productive capacity.

Information about the economics of commodities is most easily approached by sector or individual commodity, because the widely varying characteristics of each commodity or commodity group lead to significant differences in price elasticity of supply and demand. Surveys of both producer and consumer industries provide a wealth of useful data for fundamental and trend analysis. Such information is valuable for understanding the current supply and demand characteristics of a commodity, and anticipating changes in them.

The subscription databases listed in this guide contain a wealth of data and analysis about the economic fundamentals of commodities and investing in commodities. Government agencies and trade associations are both excellent sources of data on specific commodities, and many of their publications are now available online.

The following materials link to fuller bibliographic information in the Library of Congress Online Catalog. Links to digital content are provided when available.