Commodities explained: energy, metals, crops and how to own them

A commodity is a raw material that is interchangeable from one producer to the next: a barrel of a given grade of crude oil, a bushel of corn or an ounce of gold is the same thing wherever it comes from. Because the units are uniform, commodities can be traded on exchanges by standard contracts, and their prices are set in a single, visible market. They are also inputs to almost everything else, which is why their prices show up in inflation, in company profits and in the news every day.

For investors, commodities behave unlike stocks or bonds. They pay no dividends or interest, their prices swing with weather, wars, inventories and the business cycle, and most of the ways to own them run through futures contracts, with costs and quirks of their own. This guide covers the main commodity groups, how people get exposure, how a broad commodity fund has actually performed against stocks and consumer prices since 2006, and why the "inflation hedge" label is both partly true and easy to misuse.

The three commodity groups

Energy is the largest and most closely watched group. Its prices feed directly into what households pay for fuel and power: the energy component of the US Consumer Price Index was up 20.4% from a year earlier in September 2026. For how oil moves the wider economy, see Oil prices and the economy: WTI, Brent, gasoline and inflation.

Metals split in two. Industrial metals such as copper track the manufacturing and building cycle. Precious metals — above all gold — trade more like a financial asset, held for its own sake; they have their own guide, Gold and precious metals: how gold is priced and what drives it.

Agricultural commodities are seasonal and weather-driven. A single growing season can move prices by large amounts, and contracts are tied to harvest calendars. One CME corn contract, for example, covers 5,000 bushels.

How investors get exposure

There are four main routes, and they do not deliver the same return.

1. Futures contracts. Direct, liquid and leveraged. A holder must roll contracts as they expire, which adds a cost or a benefit depending on the shape of the futures curve. See Futures contracts explained: specs, clearing, expiry and settlement and Contango, backwardation and roll yield: why USO lags oil.
2. Futures-based funds. Exchange-traded products that hold futures and roll them on a schedule, such as USO for crude oil or DBC for a basket. DBC tracks a rules-based index of futures on 14 widely traded commodities and began trading in February 2006. Its return is the futures return — spot moves plus roll yield plus interest on its collateral — minus fees. Many of these funds are structured as partnerships or commodity pools, with different tax reporting from ordinary ETFs; check the prospectus.
3. Physically backed funds. Practical mainly for precious metals, which are compact and cheap to store. GLD, for example, holds allocated gold bullion with custodian banks. These avoid roll yield but charge a fee for storage and administration.
4. Producer stocks. Shares of oil companies, miners and farm-input makers. These are stocks first: they carry company and stock-market risk, and their link to the commodity price is partial (see Stocks as an asset class: long-run returns, drawdowns and recovery).

Commodities pay no income of their own. Any income a commodity fund reports comes from the cash or Treasury bills it holds as collateral, not from the oil or wheat.

The record: DBC against stocks and inflation, 2006–2026

Rebased to $100 in March 2006:

• DBC (price) reached about $141 by October 2026 ($23.94 to $33.72), an average of about 1.7% a year.
• SPY (price, before dividends) reached about $593 ($129.83 to $769.36), about 9.0% a year.
• The CPI reached about $168 by September 2026, an average of about 2.6% a year.

So over two decades a broad futures-based commodity fund did not keep pace with consumer prices on a price basis, let alone with stocks. The path was also brutal. DBC peaked at $44.78 in June 2008 and fell to $10.90 by April 2020 — a maximum drawdown of about 76% that took almost 12 years to reach bottom. It then roughly tripled to $33.72 by October 2026, including a rise of about 51% from December 2025 alone. We describe the move; the price data do not say why it happened.

When commodities earn their place

The case for commodities in a portfolio is less about long-run return than about behavior in particular years. Calendar-year price changes, December to December:

In 2022, a year when CPI inflation reached about 9%, the commodity fund rose while stocks and bonds both fell: the broad bond fund AGG lost 15.0% in price and long Treasuries (TLT) 32.8%. In 2023 the order reversed. Across all months from January 2015 to October 2026, the correlation of DBC's monthly returns was 0.34 with SPY and −0.32 with long Treasuries (TLT), and 0.08 with gold (GLD) — low enough that commodities did diversify, as covered in Correlation between asset classes: how it works and why it shifts.

The inflation link, measured

We compared each month's 12-month price change in DBC with the 12-month change in the CPI, for March 2007 to September 2026. The correlation was 0.76. The same test gave 0.10 for SPY and 0.07 for GLD. In this sample, a broad commodity basket moved with inflation far more closely than stocks or gold did — unsurprising, since energy and food are part of what the CPI measures. Two caveats: the windows overlap, which overstates how much independent evidence there is, and tracking inflation's changes is not the same as beating inflation over time, which DBC did not do on a price basis.

Pitfalls and limitations

• Price-only data understates fund returns somewhat. Our DBC and SPY figures exclude distributions. For SPY that is a large omission (dividends); for DBC it is the occasional distribution of collateral income.
• Roll yield can dominate. A futures fund's return can differ from the spot price by many percentage points a year; see Contango, backwardation and roll yield: why USO lags oil.
• Index rules matter. Broad commodity indexes differ in weights — some are heavy in energy — and in how they choose contract months. Two "commodity" funds can return very different amounts in the same year.
• Drawdowns are long. A 76% fall over 12 years is not a hedge most investors can sit through.
• Producer stocks are not commodities. They add equity risk, company risk and management decisions on top of the commodity exposure.
• Taxes and structure. Futures-based funds can issue partnership tax forms and are taxed differently from ordinary stock ETFs in the US; confirm before buying.

Commodities next to other asset classes

For how these fit together in a portfolio, start with Asset classes explained: stocks, bonds, cash, real assets and more and Diversification: why spreading your investments reduces risk.

How Finabase does it

Finabase covers commodities through futures and funds, not spot prices. The Futures page lists commodity contracts — gold, silver, copper, platinum, WTI and Brent crude, natural gas, RBOB gasoline, wheat, corn, soybeans, coffee and others — alongside index and bond futures, with each row's last price, daily change and returns from one week to two years. Each opens a symbol page, for example copper, COPPER=F or corn, USCORN=F, with a quote and a chart of the continuous front-month price.

Commodity funds such as DBC, USO and GLD trade like stocks and have ordinary symbol pages. Producer companies appear in the Energy sector and in the heatmap. The app has no commodity screener and no commodity spot-price series. The comparison chart in this article is ours, built from Finabase price data and the BLS CPI.

Frequently asked questions

What are the main types of commodities?

The main types are energy (crude oil, natural gas, gasoline), metals (gold, silver, copper, aluminum) and agriculture (grains such as corn and wheat, softs such as coffee and sugar, and livestock).

Are commodities a good hedge against inflation?

Partly. In our data, DBC's 12-month price changes tracked CPI inflation with a correlation of 0.76, and it rose in 2022 when stocks fell. But over March 2006 to October 2026 its price gained about 41% while the CPI rose about 68%.

How do commodity ETFs work?

Most commodity ETFs hold futures contracts and roll them before expiry, so their returns include roll yield and collateral interest as well as spot moves. Precious-metal funds such as GLD instead hold the physical metal.

Why don't commodities pay dividends?

Because a barrel of oil or a bushel of wheat produces no cash flow. Returns come only from price changes, plus any interest a fund earns on cash it holds as collateral.

Is it better to buy commodity stocks or commodity futures?

They are different exposures. Producer stocks add company and stock-market risk; futures and futures funds track the commodity more directly but bring leverage or roll costs. Which fits depends on what the holder wants to be exposed to.

Summary

Commodities are standardized raw materials — energy, metals and crops — whose prices are set on exchanges and feed into inflation and corporate costs. Most investors reach them through futures, futures-based funds, physical metal funds or producer stocks, and each route returns something different. Over March 2006 to October 2026, the broad futures-based DBC fund rose about 41% in price, trailing both the CPI (about 68%) and stocks (about 493% for SPY before dividends), and endured a 76% drawdown. Its strength was timing rather than total: it moved closely with inflation's swings and rose in 2022 when stocks and bonds fell together. That makes commodities a diversifier with real costs, not a substitute for growth assets.