What is a commodity?
A commodity is a raw material or basic good where one unit is just like another. A buyer does not care which farm a tonne of wheat of a given grade came from; the same goes for a barrel of crude oil of a given grade. Because they are interchangeable like this, they are traded in bulk around the world at a single quoted price.
The opposite of a commodity is a branded product, such as one company’s phone or shirt, where who made it is the whole point. So commodity prices are set mostly by world demand and supply, not by the wishes of any one seller.
Say Mr Karim runs a small bakery. His flour comes from imported wheat, his frying oil from imported palm or soybean oil, his oven fuel from gas. When world prices of wheat, cooking oil or fuel rise, his costs go up within weeks or months, and so does the price of bread. So commodity prices are not just a matter for traders; they are a matter for the daily bazar. The story is imaginary.
Why it matters to an investor
- To understand inflation: Bangladesh imports many commodities such as fuel, wheat, cooking oil and cotton, so world prices feed straight into inflation at home.
- To understand company profits: when raw materials get dearer, producers’ costs rise and sellers of those materials earn more. This matters a lot when analysing shares.
- To recognise an asset that pays nothing: a commodity pays no interest, dividend or rent itself; the only gain is a price rise.
- To read the news: to understand what headlines like “oil passes $100 a barrel” mean and how they reach your life.
The main groups
- Energy: crude oil, natural gas and LNG, coal. These have the biggest effect on the world economy.
- Precious metals: gold, silver, platinum. Many people hold them to store value.
- Industrial metals: copper, aluminium, iron ore. They rise and fall with construction and factory demand.
- Agricultural goods: wheat, rice, maize, sugar, palm and soybean oil, cotton. They depend heavily on weather and the crop season.
- Fertilisers: such as urea, which is made from gas and so is tied to energy prices.
Where and how prices are set
Most commodity prices are set on world markets in dollars, using well-known “benchmarks” such as Brent for oil. There are two kinds of trade: spot, meaning buying now at today’s price; and futures, meaning a contract agreed today to buy or sell at a fixed price on a future date.
You do not pay the full price to buy a futures contract, only a deposit or “margin”. This lets you take on the price risk of a large amount with little money, which makes both gains and losses bigger. Farmers, airlines and factories use futures to “lock in” their costs or selling prices in advance; others trade them simply hoping to profit from price moves.
A commodity exchange in Bangladesh
Bangladesh does not yet have a working commodity exchange. The Chittagong Stock Exchange (CSE) has taken steps to launch one; its rules were gazetted in 2023, allowing contracts to be bought on 5–10% margin and settled in cash at first. According to an August 2026 report, trading had still not begun, pending BSEC approvals, though the plan was to start with gold, silver and crude oil.
Beyond that, ordinary people come into contact with commodities mainly in three ways: by buying gold or silver, by buying shares in companies tied to commodities, and above all through prices at the bazar. Investing in commodity funds or futures abroad falls under foreign-exchange rules, so it is not an easy route for ordinary investors.
- Commodities have no compounding income. Brent oil, for example, reached about $147 a barrel in July 2008; by the World Bank’s figures its average price in 2025 was about $69, less than half that peak 17 years later.
Worked example
- Say you buy a futures contract on Tk 1,00,000 worth of a commodity, with 10% margin: you put down Tk 10,000.
- If the price rises 5%, the contract gains Tk 5,000. That is a 50% gain on your deposit.
- If the price falls 5%, you lose Tk 5,000, half your deposit. A 10% fall wipes out the whole deposit.
Result: on margin, small price moves become big moves in your own money. The numbers are only an example.
Common mistakes
- Thinking of commodities as safe like savings. Prices can stay down for years, and they pay no income.
- Seeing margin trading as a “small investment”, when the risk is on the full value of the contract.
- Expecting local prices to fall at once when world prices fall. The taka’s value, import costs and stocks make local prices move later or differently.
- Giving money to unlicensed apps or schemes that use the name of “commodity trading”.
Commodities are raw materials traded worldwide to a standard quality: their prices drive our bazar and inflation, but they pay no income themselves.