A commodity is basically a natural resource which can be used as raw material for creating goods that carry some monetary value. For example, iron ore is a commodity which is a basic raw material for the steel industry, which in turn is used by automobile, construction and other industries.
In the above example, iron ore is a commodity which can be exchanged for a predetermined value or with another commodity carrying equal value during the exchange period. When U.S.A imposed an embargo on Iranian crude oil and banned the payment in dollars for Iranian crude, India devised a mechanism to purchase the crude with an exchange of some sort of farm product as payment.
