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What are commodities? There are many different products and categories of products that come under the term "commodities." These product categories or sectors include Energy, Metals, Food or Agricultural, and Livestock. What all of these have in common is that they are fungible. That means that it is assumed that your bushel of corn will be like my bushel of corn. An ounce of gold in China will be the same as an ounce of gold in Argentina.

This fungibility allows for a price to be set for any specific commodity that will be recognized all over the world.

Under energy commodities would be things like oil, natural gas, ethanol, and coal. Metals can be divided into precious metals, like gold and silver, and industrial or base metals like lead, copper, zinc, aluminum, etc. These divisions are somewhat artificial since silver has many industrial uses. Agricultural commodities include corn, wheat, rye, soy, and many other grains. Also included are things like coffee, cocoa, and sugar. Livestock includes any animal used for food. Lumber is also a commodity.

Many of you are familiar with commodities because of the movie "Trading Places," with Dan Akroyd and Eddie Murphy. This movie focused on futures trading. Many commodities can only be traded on the futures exchanges. Futures trading can be complex and risky. Generally, you buy a futures contract for a specific commodity like corn. You are buying the in the belief that the price will go up (buying long) or you can bet that the price will go down (buying short). So you can make money on a product that goes down in price.

With a futures contract, you do not usually intend to buy the corn at the price you bid. You hope the price will go up and then you will sell the contract to someone else who may actually want the corn, or they may sell the contract again.

For individual investors there are many other less complex ways to buy and sell commodities. These would be primarily individual stocks, mutual funds, and exchange traded funds (ETFs).

When it comes to stocks, you can't buy shares in corn or other agricultural products. You can, however, buy stocks in agricultural companies, corporate farms and ranches. You can also profit from the boom in food prices by investing in stocks of companies that support farming. This would include companies like John Deere or companies that provide fertilizer or other farm products and equipment.

The same is true of metals. You can't buy a stock in gold, but you can buy stock in gold mining

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