Commodities Add To Gains…

| April 30, 2014 | 0 Comments

bullish chartNow that April is drawing to a close, it’s the perfect time to recap the top commodity performers of the past month.

But first, let’s discover how commodities performed overall…

Reuters/Jefferies CRB index

As you can see, the Reuters/Jefferies CRB index (blue line) gained nearly 2% in April.  That’s better than the breakeven performance of the S&P 500 (red line).  Clearly, commodities are still outperforming stocks by a substantial margin this year.

Now let’s get to April’s best performers….

Coffee

Once again, the top prize goes to coffee with a gain of 17.3%.   Investors are driving the luscious bean higher thanks to continued global production worries.  As you may remember, coffee surged in February on fears an ongoing Brazilian drought will put a big dent in the country’s usually hefty production.

A recent Citigroup report estimates this year’s Brazilian harvest will produce 44.25 million bags.  That’s a far cry from the 60 million bags analysts thought the country would produce before the drought hit.

And believe it or not, now there’s another worry…

As I mentioned here, scientists are upping the odds of an El Niño hitting this year.  When this weather phenomenon occurs, dryness tends to consume South America.  If it comes to fruition, Brazil’s drought will likely get worse.

Natural Gas

Decimated US natural gas inventories have investors staying on the long side of natural gas.   The commodity put in a solid April performance, gaining 7.7%. 

As I’m sure you’re aware, the US just suffered through one of the coldest winters in decades.   Since natural gas heats around 50% of US households, inventories of the commodity sank steeply over the past few months.  In fact, storage levels are currently sitting at 899 bcf, which is 48% below last year’s level and a whopping 52% below the 5-year average!

Bulls will remain in control of natural gas until EIA weekly storage additions jump above analysts’ estimates.

Orange Juice

OJ put in another strong monthly performance of 7.4% as investors fretted over the citrus greening disease consuming Florida.  As I mentioned in previous articles, greening disease causes oranges to drop from trees prematurely. 

The United States Department of Agriculture expects Florida, which is the largest producer of oranges in the US, to produce 110 million boxes this year- the smallest crop since 1985.

Grains

Corn, wheat, and soybeans held strong in April with gains of 5.2%, 2.8%, and 5.3% respectively.  Investors are keeping grains on an upward trend thanks to multiple fundamental factors.

The Ukraine crises, poor US planting conditions, strong exports, and the threat of El Niño all have the potential to disrupt global grain supplies.

Palladium

Palladium advanced 3.8% in April and is still flirting with the highly important $800 an ounce level.   This month’s advance has the precious/industrial metal sitting on an 11.8% gain for the year.

Investors are concerned the Ukraine crisis will slow, or possibly even halt, palladium exports out of Russia.  As you may know, Russia is one of the world’s largest producers of the metal along with South Africa.

So there you have it…

Commodity performance was solid in April as investors eyed fundamental developments.  Unlike stocks, which many analysts feel are blatantly overvalued, commodities trade in respect to underlying supply/demand fundamentals. 

As a result, we could see strong commodity performance continue as stocks weaken.

Until Next Time,

Justin Bennett

Tags: , , , , , ,

Category: Commodity Trading

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.