Commodity Performance: This Isn’t Pretty…
The third quarter is drawing to a close, which makes it the perfect time to recap commodity performance over the past three months.
But first, let’s see how hard assets performed overall…
As you can see, the Reuters/Jefferies CRB index (blue line) weakened substantially in the third quarter. The decline has the commodity-focused index sitting at an uninspiring year-to-date gain of 1.06%.
You’ll also notice the S&P 500 (red line) furthered its advance over the CRB, running to a 7% year-to-date gain.
To see why the CRB gave up so much ground in the third quarter, let’s cover the biggest commodity movers over the past three months.
First, the top performers…
Feeder Cattle
Yet again, feeder cattle turned in another spectacular quarterly performance, rising 10.8% since July 1st. The commodity is trading at all-time highs near $2.35 a pound.
Cattle are cruising to new heights thanks to an ongoing inventory shortage. Drought and decades of poor economics have the US cattle herd sitting at the lowest level since 1951.
While the spectacular gains we’ve seen in the cattle market won’t likely continue, prices will likely stay over $2 a pound for quite some time. That’s because it will take years for US ranchers to rebuild their herds.
Coffee
Believe it or not, the benevolent bean is on another bullish bender. The commodity rose 10.4% in the third quarter and is currently trading just shy of $2.00 a pound.
What sent coffee higher in the third quarter?
Incoming Brazilian harvest data is confirming the early-2014 drought did plenty of damage to delicate coffee trees. In fact, Brazil’s National Coffee Council sees the country’s harvest dropping to 40 million bags this year- an 18% drop from last year.
What’s more, the severity of the drought could drastically hamper the 2015 harvest as well.
Cocoa
The chocolaty commodity is tacking on impressive gains as the third quarter draws to a close. As you may remember from a recent article, cocoa is rising on West African Ebola fears.
If the deadly virus pops up in the Ivory Coast, the world’s top cocoa producer, exports from the country could grind to a halt.
Cocoa is currently trading just shy of $3,300 a ton, which gives it a 5.3% quarterly gain.
And now for the worst performers…
Soybeans, Corn, and Wheat
No doubt about it, abundantly bearish trading in the grain market played a large part in the CRB’s weak quarterly performance. Soybeans plummeted 31% since July 1st, while corn and wheat sank 23.4% and 17.3% respectively.
What’s killing these commodities?
Thanks to Mother Nature’s very cooperative weather, US farmers are about to harvest a bumper crop of corn and soybeans. As a result, the commodities are trading at multi-year lows. Meanwhile, Russia is expected to produce an outsized wheat crop.
Silver and Gold
Silver was slaughtered in the third quarter, dropping 19.6%, while gold sank 8.9%.
What happened?
Loyal Commodity Trading Research readers know the US Dollar is screaming to new multi-year highs. As a result, the entire precious metals complex is taking a beating.
Remember, precious metals (and many other commodities) trade inversely to the US Dollar. In other words, when the Greenback rallies, gold and silver trade lower.
Lean Hogs
After a strong start to the year on PEDv fears, lean hogs plummeted 18.6% in the third quarter. The downturn is attributed to the end of the summer grilling season along with Russian food import sanctions.
Rounding out the third quarter’s worst performers are platinum, palladium, and crude oil with losses of 12%, 9%, 13% respectively. Once again, these hard assets were greatly affected by the soaring US Dollar.
There you have it…
Without question, it was a generally rotten quarter for commodities. However, the recent downturn in prices is creating solid long-term buying opportunities in specific hard assets.
Stay tuned to Commodity Trading Research to find out which ones!
Until Next Time,
Justin Bennett
Category: Commodity Trading
