Pork Outdoes Gold In The First Quarter

April 08, 2010

 

Energy

 

 

Commodity

31-Dec-09

Price

31-Mar-10

Price

Gain/

(Loss)

ETP:

Type

ETP Gain/

Loss

NYMX Crude Oil

$79.62

$83.38

5.1%

USO: ETF

2.6%

NYMX RB Gasoline

$2.0622

$2.2967

11.4%

UGA: ETF

3.5%

NYMX Heating Oil

$2.1202

$2.1667

2.2%

UHN: ETF

2.2%

NYMX Natural Gas

$5.578

$3.865

(30.7%)

UNG: ETF

(31.6%)

Key: ETF = Exchange-Traded Fund

 

Contango accounts for the difference in returns between NYMEX oil and the crude ETP. Incremental losses eat into spot gains, as long positions are rolled forward to maintain exposure.

The widely disparate performance of the gasoline products stems from the futures term structure, which has been extremely volatile lately. There's both backwardation and contango in the gasoline market. To boot, the inversion and normality is fluid: On one day, nearby deliveries are backward and the back months are in contango, while at other times, the situation is reversed.

Still, the petroleum sector is largely bullish. Seasonal factors now favor gasoline as the summer driving season approaches. The standout exception is natural gas, which is currently a market overburdened with supply.

 

Softs

 

 

Commodity

31-Dec-09

Price

31-Mar-10

Price

Gain/

(Loss)

ETP:

Type

ETP Gain/

Loss

ICE Sugar #11

26.62¢

16.55¢

(37.8%)

SGG: ETN

(36.4%)

ICE Coffee

$1.3590

$1.3650

4.4%

JO: ETN

(1.5%)

ICE Cocoa

$3,292

$2,957

(10.2%)

NIB: ETN

(10.9%)

ICE Cotton

75.91¢

80.97¢

6.7%

BAL: ETN

4.3%

Key: ETN = Exchange-Traded Note

 

Performance gaps in the softs sector are attributable to timing artifacts. The least liquid exchange-traded notes exhibited the largest disparities between last sale prices and current bid/offer spreads. Sugar and cocoa ETNs have been comparatively active and, as a result, display relatively small difference between spot commodity and security returns.

Softs were a mixed bag in the first quarter, as foodstuffs backed off from the gains made in 2009. Sugar, not surprisingly, took the largest loss after topping out at more than 30 cents per pound late last year. Cotton, however, remains in a bull market.

 

Grains And Oilseeds

 

 

Commodity

31-Dec-09

Price

31-Mar-10

Price

Gain/

(Loss)

ETP:

Type

ETP Gain/

Loss

CBT Corn

$4.1425

$3.4500

(16.7%)

JJG: ETN

(16.8%)

CBT Wheat

$5.4100

$4.5650

(15.7%)

JJG: ETN

(16.8%)

CBT Soybeans

$10.4750

$9.4000

(10.3%)

JJG: ETN

(16.8%)

Key: ETN = Exchange-Traded Note

 

As of today, there are no single-commodity ETPs for grains in the U.S. market yet. The iPath Dow Jones-UBS Grains Subindex Total Return ETN (NYSE Arca: JJG), however, represents a three-pronged investment approach to the grain markets. About 43 percent of JJG's underlying index is allocated to soybeans. The balance is split between corn (35 percent) and Chicago wheat (22 percent).

The oversupply in grains brought about by increased planting intentions and large carry-overs has depressed prices.

 

Livestock

 

 

Commodity

31-Dec-09

Price

31-Mar-10

Price

Gain/

(Loss)

ETP:

Type

ETP Gain/

Loss

CME Live Cattle

86.05¢

93.65¢

8.8%

COW: ETN

6.4%

CME Lean Hogs

65.20¢

83.10¢

27.5%

COW: ETN

6.4%

Key: ETN = Exchange-Traded Note

 

Like the grain sector, there aren't yet single-commodity ETPs for livestock in the U.S. market. The index underlying the iPath Dow Jones-UBS Livestock Subindex Total Return ETN (NYSE Arca: COW) allocates 60 percent of its capital to live (fattened) cattle and 40 percent to lean hogs.

After culling years' worth of oversupply, the hog market has finally found a sweet spot for producers. Meanwhile, discounting by wholesalers in the beef trade has cleared inventory enough to finally bolster prices.

An aggressive contango in old crop hogs, together with the illiquidity of the COW ETN and the overweight in cattle, accounts for the security's relatively low apparent return.

 

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