The Hindu Business Line : The next `new' thing is `things'

COTTON, coffee, sugar, oil, wheat, rice... This is not a grocery list for you to pick up on your way home, but a pick from some of the common commodities that figure in business pages along with precious metals and scarce oil, steel and scrap, humble pyaj and ubiquitous kirana. "A commodity appears at first sight an extremely obvious, trivial thing," as Karl Marx said. So, why should we be suddenly interested in the daily bread and butter? Because the commodity market is hotting up even as the dollar is falling and the inflation is rising. As crude rallies to record highs, there is nervousness on Wall Street in the face of grim forecasts of corporate earnings slowing in 2005. "Commodity prices booming on speculative interests," reads an arresting headline.

Commodity, as the Concise Oxford English Dictionary explains is "a raw material or primary agricultural product that can be bought and sold, a useful or valuable thing." The word is sandwiched between commodious (meaning, roomy and comfortable) and commodore (a naval rank above captain). Commodify is a word that marketers dread because brand loses meaning when something gets treated as a mere commodity.

Commoditisation is, thus, a stage in the evolution of products when competing brands offer similar features, so the race gets fought only on the price plank. Commoditisation can cause price fluctuations, explains the Dictionary of Financial Risk Management on www.amex.com while defining the word as "a process of marketability enhancement in which illiquid financial contracts are modified for trading in more liquid and transparent markets."

In most English dictionaries, you'd find, not far from commodity, an entry for `commode', which well, you know is the toilet. But that is the word Encarta asks you to see, since commodity is from "Latin commodus, useful." In commode you'd find the same Latin root, explained further: "literally `conforming with due measure, quite fit,' from modus `measure' (see mode)." So, to mode we go, and http://encarta.msn.com informs that the origin lies in Latin the modus, `measure, rhythm, song, manner', and that the sense `fashion,' is from French mode. As if to explain the volatility in commodities, turmoil is a related word, I learn from Online Etymology Dictionary: Turmoil is "from Latin trimodia `vessel containing three modii,' from modius, a Roman dry measure, related to modus."

There are two types of commodities, soft and hard, as Oxford Dictionary of Business classifies. `Softs' are grain, cocoa, wool, jute, rubber, pork bellies, orange juice and so on, also known as `produce'. Metals are examples of hard commodities. "More modern commodities include bandwidth, RAM chips and (experimentally) computer processor cycles, and negative commodity units like emissions credits," notes Wikipedia.

The Bard can introduce you to many other commodities too. For instance, the clown in Twelfth Night speaks of "commodity of hair... a beard!" And young Master Rash is in for "a commodity of brown paper and old ginger, ninescore and seventeen pounds," in Measure For Measure. Parolles has a practical tip to offer in All's Well That Ends Well, "Tis a commodity will lose the gloss with lying." In King Henry IV, Falstaff wished he knew where "a commodity of good names were to be bought".

`Commodity market' is where commodities are traded, on screen or in the place of origin. Auction is common, as in the case of tea, where dealers examine each lot; when quality standards are followed, it becomes easier to trade commodities. `Commodity art' is one that aims at commercial appeal rather than an expression of the artist's mind. `Commodity fetishism,' as defined on www.arts.ouc.bc.ca by the Department of Fine Arts, Okanagan University College, "is an overweening preoccupation with the status possessions afford to their owners, and their exchange value independent of their `actual' worth."

`Commodity money' was a stage in the evolution of money when a commodity such as goat or gold was the standard of value for settling debts; such money had intrinsic value, unlike the paper currency. "Money is the representative of a certain quantity of corn or other commodity. It is so much warmth, so much bread," affirms Ralph Waldo Emerson. You hear Antonio's desperate lament in The Merchant of Venice, "Thou know'st that all my fortunes are at sea; neither have I money nor commodity."

Marx rued that under capitalism people have become commodities or exchangeable `things'. In his analysis, "labour power is the only commodity which can produce more value than it is worth, and for this reason it is known as variable capital," as http://plato.stanford.edu explains. Falstaff speaks of "such a commodity of warm slaves," in King Henry IV. However, Hermione protests in The Winter's Tale, "To me can life be no commodity."

Daniel J. Boorstin avers that knowledge is not simply another commodity, for it "increases by diffusion and grows by dispersion". However, "A political organisation is a transferable commodity," as John Jay Chapman, and that may resolve stalemates in some States. Esther B. Fein's comment about the United Nations, that as a country unto itself, "the commodity it exports most is words," may be true for most diplomacy. A sobering comment for the media is of Hunter S. Thompson: "Absolute truth is a very rare and dangerous commodity in the context of professional journalism."

Commodities are traded, both in actuals but also futures. "A commodity futures contract may be settled either by cash or by delivery of commodity depending upon the terms of the trade, demand of the buyer and rules of the exchange," explains www.nsdl.co.in. Delivery can happen by handing over warehouse receipts to the clearinghouse of the commodity exchange. The National Securities Depository Ltd (NSDL) has agreements with two multi-commodity exchange — the National Commodity and Derivatives Exchange Ltd (NCDEX) and the Multi Commodity Exchange of India Ltd (MCX) — for handling dematted warehouse receipts for seven commodities, such as gold, silver, pepper and so on.

There is the National Multi-Commodity Exchange of India Ltd (NMCE) too, offering electronic trading and settlement systems. On www.fmc.gov.in, the site of the US Forward Markets Commission, under the Ministry of Consumer Affairs, Food and Public Distribution, you can catch up with fortnightly data on commodity trading.

A recent research paper on the topic is `Commodity Futures in India,' by Rajesh Chakrabarti of the College of Management, Georgia Tech. He writes: "The idea of trading futures may be traced to forward contracts as far as back to around 2000 B.C. in China." Commodity derivatives are not exactly new to India, you learn from Rajesh's thesis.

"Forward trading in commodities existed in India from ancient times (it is mentioned in Kautilya's Arthashastra) and the first modern futures market was established in 1875 for cotton contracts by the Bombay Cotton Trade Association, just a decade after the Chicago Board of Trade (CBOT) traded its first future," states the paper."The next bull market is here. It's not in stocks. It's not in bonds. It's in commodities," proclaims a new book titled, Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market, by Jim Rogers. "In 1998, he started his own commodities indexed fund. It's up 165 per cent since then, with more than $200 million invested, and it's the single best performing index fund in the world in any asset class," announces the front flap of the book, taking you on to `the next new thing' - `things'.

But one question: In a world of things, of commodities, what would be new?

ComingToTerms@TheHindu.co.in

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