Mid-Year Scorecard: Did You Catch These Top Performers?
Believe it or not, the first half of 2014 is going in the record books tomorrow. That makes it the perfect time to recap the top commodity performers over the past six months.
But first, let’s discover how commodities performed overall…
As you can see, the Reuters/Jeffries CRB index (blue line) put in a strong June performance. This month’s advance is pushing the commodity-focused index to a year-to-date gain of nearly 11%. That’s far better than the 6% gains put together by the S&P 500 (red line).
Clearly, a basket of commodities is still outperforming stocks by a fairly wide margin this year.
Now let’s get to the best commodity performers over the past six months…
Coffee
The luscious commodity we all know and love is still holding onto this year’s top spot with gains of 56%. As you may remember, coffee exploded higher in February thanks to Brazilian drought fears. While some of the short-term supply shortage fears have faded in recent weeks, longer-term Brazilian production worries are still prevalent.
Lean Hogs
While coffee’s gains are impressive, we may have a new leader soon. Lean hogs are advancing to new all-time highs of $1.30 a pound in recent trading. Those gains are propelling hogs to 53% year-to-date gain.
What has hogs sizzlin’ to record highs?
US pig farmers are having very little success in slowing the advance of the deadly porcine epidemic diarrhea virus (PEDv). In case you’re unaware, this nasty disease kills nearly 100% of infected piglets under 2 weeks old. Supply shortage fears are growing as analysts estimate 7 million piglets have died from the virus over the past year.
The worst part is, there’s no cure for PEDv. According to the most recent USDA analysis, the virus has spread to 4,700 farms in 30 states and is still advancing.
Feeder Cattle
While there’s no virus to blame for feeder cattle’s 29% year-to-date rise, supply shortage fears are just as prevalent. With many western states trapped in an unforgiving drought, the US cattle herd is sitting near a six-decade low. Withering forage has ranchers in many parts of the country culling their herds to stay afloat.
Palladium
It’s no secret South Africa is one of the world’s largest palladium producers. But you may not be aware that South African mine workers have been off the job for the better part of this year in search of higher wages. With mines sitting idle and supply worries mounting, investors sent palladium soaring 18% year-to-date.
Cocoa
The price of this essential chocolate ingredient is on a steady upward trend thanks to long-term supply worries. The International Cocoa Organization believes rising global demand will send the global cocoa market into shortfall. That has investors bidding the commodity up 15% on the year.
But the most worrisome news for cocoa may hit in just a few months…
Scientists are upping the odds of an El Niño forming this year to 75%. When this disruptive global weather pattern occurs, it tends to send the African west coast into extreme drought. Since the lion’s share of global cocoa production comes from this region, an El Niño would place considerable hardship on already struggling producers.
Rounding out the top year-to-date performers are sugar (+10.5%), gold (+9.5%), platinum (+7.8%), silver (7.7%), and crude oil (+7.3%).
So there you have it…
Commodities performed strongly in the first half of the year as investors eyed ever-changing fundamental developments. Unlike stocks, which many analysts feel are blatantly overvalued, commodities trade in respect to underlying supply/demand fundamentals.
Stay tuned for continued commodity focused research and analysis!
Until Next Time,
Justin Bennett
Category: Commodity Trading
