Commodities
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Commodities
kəˈmɒdətiz (n.)
Stuff you can eat, stick in your gas tank, get out of a power supply, or make things out of. Real world perishable goods.
Under the Commodity Exchange Act of 1936, defined, amusingly, as follows:
The term “commodity” means wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice, and all other goods and articles, except onions (as provided by section 13–1 of this title ) and motion picture box office receipts (or any index, measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value or data related to such receipts) in which contracts for future delivery are presently or in the future dealt in.
Let us parse that. (Disclaimer: this is a matter of the application of the English language and may or may not reflect U.S. law and practice):
We think:
“wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops”
and
“fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils)”
and
“cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice”
fit comfortably within the general catch-all “all other goods and articles” though it is fun that only frozen concentrated orange juice gets a mention, and not other kinds of orange juice, and the fats and oils mentioned do not seem to be of the commercial energy generating type (thought tallow candles and I guess you could covert soyabean oil into diesel — which shortens our clause to:
The term “commodity” means all goods and articles, except onions and motion picture box office receipts and their derivatives (Movie Ticket Receipt Instruments), and all services, rights, and interests (except Movie Ticket Receipt Instruments) in which contracts for future delivery are presently or in the future dealt in.
| Commodity | Physical | Futures |
|---|---|---|
| Onions | No | Yes |
| Movie Ticket Receipt Instruments | No | No |
| Anything else | Yes | Yes |
The CFTC regards as a “commodity” any service, right or interest for which a futures contract exists, or could exist in the future. The CEA classifies commodities into three categories:
- “agricultural commodities”: wheat, cotton, corn, soybeans, tobacco and livestock and so on BUT NOT ONIONS.
“excluded commodities” include financial instruments, such as rates, currencies, securities and indices. “exempt commodities.” Is anything else, and include energy and metals.
Onions=
Onion futures are forbidden in the United States since two onion traders cornered the market on the CME in 1955. True Story. The Onion Association lobbied hard at the time of Dodd-Frank to ensure things stayed that way. Also a true story.