Return of Commodity Sex Appeal?

Are commodities getting their groove back?   The following chart from All Star Chart’s recent post – “You Like that Breakout in Commodities” – sure makes you wonder… now that Coffee, Sugar, Cattle, and Hogs are on a tear. Put that all together, plus some energies and metals  into one index,  and commodities are definitely ‘breaking out’.

CCI Commodity Index(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: All Star Charts

For all those who think  you can only make money in commodities when they go up, this chart is a good sign. For those who know about making money whether commodities go up or down – this chart is a good sign.  Which brings us to our monthly table tracking various commodity markets by their exposure type – futures contracts on the one hand  (buying and holding December contract), and the packaged ETF’s that supposedly track them on the other – to see which outperforms the other.

Commodity ETF Over/Under Performance 2014

Commodity
Futures
ETF
Difference
Crude Oil$CL_F
2.64%
$USO
4.02%
1.38%
Brent Oil$NBZ_F
-0.84%
$BNO
-1.00%
-0.17%
Natural Gas$NG_F
9.11%
$UNG
23.30%
14.18%
Cocoa$CC_F
9.14%
$NIB
8.46%
-0.68%
Coffee$KC_F
54.83%
$JO
65.30%
10.47%
Corn$ZC_F
4.72%
$CORN
6.21%
1.49%
Cotton$CT_F
-0.78%
$BAL
1.64%
2.41%
Live Cattle$LE_F
3.85%
$CATL
3.11%
-0.74%
Lean Hogs$LH_F
8.49%
$HOGS
15.27%
6.78%
Sugar$SB_F
6.10%
$CANE
4.18%
-1.92%
Soybeans$ZS_F
3.02%
$SOYB
7.35%
4.33%
Wheat$ZW_F
-1.80%
$WEAT
-1.76%
0.03%
Average8.21%11.34%3.13%
Commodity Index $DBC1.87%
Long/Short Ag Trader CTAs-0.22%

(Disclaimer: past performance is not necessarily indicative of future results).
(Disclaimer: Sugar uses the October contract, Soybeans the November contract.)
Long/Short Ag Trader CTA = Barclayhedge Ag Traders Index

Some takeaways:

1) The commodity index we use for a comparison - DBC – is under performing them all, only up 1.87% for 2014, versus the big breakout seen in the Returs-CRB index per All Star Chart’s chart and the individual commodity markets themselves. This is due to the Reuters-CRB index being equal weighted, versus a heavy energy component for DBC.

2) The Ag Trader’s who can go long and short commodities are underperforming the long only index as of now…it will be interesting to watch their relative performance should commodities continue to rally.

3) The ETF’s tend to outperform in the first month or two of the year, before the ETFs have had to start rolling their contracts (much of the ETF underperformance we observe is generated by their having to roll their front-dated futures contracts repeatedly throughout the year, creating a cost drag).

All Star Charts explains why these numbers are tending to be overlooked – because the commodities that are making the moves, aren’t the more popular ones.

“I think a big reason why this isn’t getting much love is the fact that the popular commodities aren’t the ones making the major moves. Sure, Crude Oil has had a nice little run recently and the precious metals as well. But when put into context, the moves are minimal compared to the disaster they have been in recent years. These guys have been beat up for so long that they’ve lost their sex appeal.”

We think it may also have something to do with most people looking at different commodity indices, which haven’t broken out because they are skewed towards energies… and that little thing going on over there with stocks once again marking all time highs.

What do you think? Are Commodities getting back their mojo?










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Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

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