Commodities: Q3 Performance Improves Drastically…

| October 7, 2013 | 0 Comments

3rd Quarter WinnersOn Friday, we discussed the worst performing commodities for the third quarter of 2013.

In case you missed it, corn, soybeans, lean hogs, coffee, and natural gas slid lower over the past three months.

Now let’s look at the top performing major commodities since July.

Here we go…

Cocoa – up 20%:  This African produced commodity is on a roll.  Since the start of July, the chocolaty asset has jumped from $2,150 a ton to just over $2,600.  The recent rise is due to the suddenly increasing odds of a global cocoa deficit. 

In fact, commodity analysts are pegging the looming shortfall at around 130,000 tons.  As a result, chocolate will likely be more expensive this holiday season!

Silver – up 16%:  As you may know, silver was easily one of the worst performing hard assets of the first half of the year.  The metal dropped to three year lows near $18 an ounce in June.

But once July rolled around, investors started looking to the benefits of this lustrous metal once again.   When Federal Reserve Chairman Ben Bernanke revealed his US economic stimulus tapering plan wasn’t set in stone, the metal jumped as high as $25.

Sugar – up 12%:  I devoted a recent article to this overly abundant commodity.  There’s so much sugar lying around that the US Government is buying the commodity on the open market.  When they do, they immediately sell it to domestic ethanol plants at a huge loss.

In a nutshell, Uncle Sam is throwing millions of dollars down the drain just so US sugar producers won’t default on USDA loans.

Even though prices are up, sugar is one commodity to steer clear of going forward.  The recent rise is nothing more than artificial demand created by the USDA.

Feeder Cattle – up 9%:  Unlike sugar, the cattle market is in a perfect storm of bullish fundamentals… low supply and high demand.  Feeders are trading at all time highs near $1.65 a pound partly due to strong demand for US beef in overseas and domestic markets.  

But that’s not all…

Another big reason prices are soaring is the dwindling US cattle herd.  In fact, the total 2012 US calf crop came in at 34.2 million head.  That’s the lowest level since 1949.  As a result, US feedlot numbers are sinking, which in turn pushes the price of cattle higher.

Gold – up 8%:  After taking an absolute beating in the first half of the year, gold turned in solid gains in the third quarter.  Strong Asian and global central bank demand pushed the yellow metal from $1,225 an ounce in early July, up to $1,425 by the end of August.

Copper – up 8%:  Chinese economic data sent the price of copper soaring in early August.  A huge and unexpected increase in China’s import/export data proved the country’s economy isn’t as bad off as many were predicting.

The sudden increase, which carried over into September, means China’s enormous demand for copper isn’t going away any time soon.

So there you go folks…

Rounding out the top Q3 performers were platinum, palladium, and wheat with gains of 5%, 3%, and 3% respectively.  Crude oil essentially broke even with a slight improvement of 0.5%.

As you can see, commodity performance as a whole was much improved in recent months.   Unlike the second quarter, there were more winning commodities than losers.  As a matter of fact, the Reuters/Jeffries CRB Index (CRB) turned in gains for the first time since Q3 2012.

Not only did individual supply/demand metrics improve in Q3, but a big drop in the US Dollar put the wind behind the back of many hard assets.

Where do commodities go from here?

As long as Washington politicians don’t push the US economy over a cliff with a debt ceiling debacle, I suspect strong commodity performance will continue as 2014 draws near.  Natural gas, feeder cattle, and precious metals are three markets I’ll be watching closely.

Stay tuned to Commodity Trading Research for continued coverage of the hard asset markets in the fourth quarter and beyond!

Until Next Time,

Justin Bennett

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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.