Grade

Grade is the specific quality standard a commodity lot must meet, covering factors like purity, size, moisture, or protein, that determines which price it can be sold against.

Grade sets the specific quality bar a lot of a commodity must clear to be sold, delivered against a futures contract, or priced against a given benchmark. What grade actually measures depends on the commodity: moisture content and protein for wheat, sulfur content and density for crude oil, purity for refined metal, staple length and strength for cotton.

Grade is what makes a commodity a commodity in the trading sense: a buyer accepting a standard grade does not need to inspect each lot individually, because meeting the grade is itself a guarantee of what they are getting. Material that falls short of a required grade is not worthless, but it is typically sold at a discount, a differential reflecting the gap, into a market willing to accept the lower quality.