You have probably heard the word commodity thrown around and you might have gathered that a commodity is something that can be produced and sold or traded. However, there is so much more to commodities than that. There are two types of commodities that products are divided into:
Soft Commodities: soft commodities are products that can be grown. Many people think that soft commodities are anything that can be consumed and that is sort of correct. Really soft commodities are any commodity that does not contain metal, or energy. So soft commodities are everything else that does not fit into those restrictions. Soft commodities are everything from cocoa to lumber. Now, most of what is considered a soft commodity can be eaten like cocoa and sugar but you would not eat wool or wood which are also considered a soft commodity. Soft commodities are also defined by how fast things can spoil. Things that spoil quickly like bananas, soy beans, and coffee beans are considered soft commodities. But things that do no spoil easily but are grown like cotton, can be considered hard commodities.
Hard Commodities: hard commodities are products that are typically mined out of the earth. As most people know, commodities are things that people cannot consume. Somel hard commodities are consumed but in a different way. When most people think of hard commodities they think of things like oil and natural gas. Those are hard commodities but so are electricity and metals. As mentioned above, products that do not spoil easily are also defined as hard commodities, which means the line between what is considered soft and what is considered hard can get a little confusing. For example, lumber can be defined as a soft commodity because it is grown, and does not contain metal or energy, but it can also be considered a hard commodity because it does not spoil easily.