What is a commodity in finance?

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.
One can buy options on many commodity futures contracts to participate in the market for less than it might cost to buy the underlying futures contracts. One can also invest through commodity funds.
Commodity finance aims to provide short-term, self-liquidating finance facilities to a range of trading companies from the mid-sized specialist product trader to the globally-integrated major trading houses. These facilities may be secured or unsecured depending upon the perception of the creditworthiness of the borrower and the structure of the business undertaken.