5-28 IAN Commodities

  You hear so much about commodities these days. But what exactly are commodities?  There’s so much money in commodities I had to have an answer so I called up U of I economist Dr. Paul Patterson and put the question to him. “Couple of different connotations with commodities sometimes it’s situation specific a lot of times when people talk about commodities people think we are specifically talking about grains, corn, cotton, wheat, soybeans those kind of crops but in general the definition is that they are crops that are sort of mass-produced but you cannot differentiate between one and another. So once you put wheat in the bin, it’s the same marketing class whether it came from Washington state or Idaho or Oregon it’s indistinguishable. Therefore those  tend to be classified as commodities. If you can differentiate that and if it’s more of a specialty crop then those tend not to be classified as commodities. So it’s not a hard and fast rule about which crops are in fact commodities but the one thing from an economist’s perspective, it’s usually those crops that are undifferentiated from the same crop produced in other regions of the country. And what traditionally happens with commodities is the lack of ability to differentiate is that the price gets driven by cost of production and the only way to make money in those crops ultimately is to be the low-cost producer.”