Why aren't paintings commodities? Because each one is unique. Commodities are uniform and one individual or portion serves the same purpose as any other. An ounce of gold, a barrel of oil, a bushel of wheat. In every case, one is pretty much like another. It makes little difference to most of those buying it whether they receive this ounce of gold or that one.

Observe there are some differences. Because of shipping costs, differences in composition, and so forth, some oil does sell for a different price than that from another source. Menthe oil & Caster Oil are close enough for many purposes, but they trade on different markets and have different prices.

Commodities can be traded on either spot markets, or in the form of futures.

Spot markets are those in which the commodity is traded immediately in exchange for cash or some other good. You go to the local jewelry store and buy an ounce of gold. That's a spot trade. You give the jeweler several hundred rupees in cash, he gives you an ounce of gold, usually in the form of a coin, 'on the spot'.

Other traders exchange commodities on spot markets in much greater quantities - thousands or millions of ounces of gold or barrels of oil. At some time the actual good is delivered. After all, at some point, someone has to use the good or it's, so to speak, no good.

In the form of futures (or options), what is traded is not the goods itself, but a contract to buy or sell the commodity for a certain price by a stated date in the future.

Most commodities trading is done in the form of futures or options and it's that scenario that gives rise to most of the huge potential for profit and loss. It also gives rise to all the interesting aspects of trading, since it inherently involves predictions of the future and hence uncertainty and risk.

Commodities trading has been around for centuries, but the modern markets arose in the late 18th century when farming began to be modernized. Though the pace of trade and many of the detailed mechanisms has changed, the basics are still the same.

Growing wheat, for example, took several months then from planting         to harvest to delivery. It still takes several months. A farmer might plant wheat in April and discover in June that the price someone is willing to pay for delivery in August has dipped over the past month.

For example, suppose on May 1st wheat to be delivered September 1st is selling for Rs.1080 per bushel. By June 1st, it has fallen to Rs.900. The farmer may believe the price will continue to fall. He offers a contract on his wheat to be delivered September 1st for Rs.900 per bushel, locking in a price today at the current market level. In exchange, he accepts a legal obligation to deliver the wheat on or before September 1st.

Fortunately for the farmer and others, some believe the price will in fact not fall but instead will rise by September 1st to Rs.1100 per bushel.

That kind of prediction is typically based on a very complicated analysis of current conditions, such as the total amount of acre under plant, soil moisture levels, weather predictions for the coming months, political events and dozens of other variables.

No one knows the future price with certainty, that's why it's called speculation.
Come September 1st the farmer delivers his wheat and is paid Rs.900 per bushel. If the price turns out then to be Rs.1100 per bushel, the speculator makes a healthy profit. If the price is, say Rs.1060 per bushel, the speculator has lost money.

That's commodities trading in a nutshell, or rather in a basket.

Indian Commodity Market

Indian Commodity market is all set to create a nation wide online multi commodity exchange to create a centralized trading environment across India for Futures & Options.

The basic economic purpose of commodity futures exchange is to enable commodity producers/processors to sell their produce in advance to protect them against possible price fall for these commodities and allow traders, processors & exporters to buy in advance to protect against possible price increase. By this they will be able to lock/hedge the price which they will receive and they shall pay respectively.

The term 'Derivative' indicates that it has no independent value, i.e. its value is entirely 'derived' from the value of the underlying asset. The underlying asset can be securities, commodities, bullion, currency, livestock, etc. Derivatives can be traded in the form of Futures, Options or its variants unlike commodities trading.

Commodity derivatives have had a long and a wide-spread presence in India with commodity trading being one of the most popular ways of investment. The commodity derivative market has been functioning in India since the nineteenth century with organized commodity trading in cotton through the establishment of the Cotton Trade Association in 1875. However, commodity trading in India has recently developed with commodity news and online commodity trading.

Currently there are 4 national level multi commodity exchanges which are included in commodity trading in India: National Multi-Commodity Exchange of India (NMCE), National Commodity and Derivatives Exchange (NCDEX), Multi Commodity Exchange (MCX) and Indian Commodity Exchange (ICEX). Commodity trading in India takes place with a constant reflection of the prices through commodities news and commodities charts.

There has been a substantial jump during recent times in commodity trading through volumes of commodities from Rs. 5.71 Lakh Crore in the first year in 2004-05 to Rs. 48.2 Lakh Crore in 2008-09 and to Rs. 119.5 Lakh Crore in 2010-11. Currently the Average daily Turnover is about Rs. 45,000 Crores and is expected to grow over a period of time. Live commodity prices can be seen on portals that support online commodity trading.