While it's been all rosy for agriculture, for base metals, performance has been more mixed. On the one hand, some of the metals have performed phenomenally. Take nickel, for example; it's rallied a whopping 52 percent since the start of the year. On the other hand, copper has lost 7 percent, making it the worst performer of the commodities we follow.
It's not uncommon to see a lot of variation in the performance within base metals, but this year has been exceptional in that regard. In January, Indonesia surprised markets by banning exports of raw nickel. Indonesia is the world's No. 1 producer of the metal, and analysts at Citigroup said, "The effective removal of Indonesian nickel ore exports is akin to the removal of Saudi Arabia from crude oil exports in terms of importance to the nickel market."
At the same time, concerns about Russian nickel supplies, as the country continues to be embroiled in its conflict with Ukraine, has given another shot in the arm to that commodity in recent weeks.
Bull Case: Analysts are forecasting massive nickel deficits in the wake of Indonesia's export ban. Analysts at Macquarie say that "in the absence of a change in Indonesian policy, we think that by 2016, the market will get tighter than in 2006-07, when prices traded in the $30,000-$50,000 a metric tons range." Those prices are significantly higher than the $20,000 that nickel currently trades at.
Bear Case: An end to Indonesia's nickel ban would lead to a dramatic decline in prices. Industry groups are challenging the ban in the courts, and thousands of workers have been laid off, which is sure to put pressure on the government to reverse course.
Prediction: The nickel rally isn't over, and prices will spike dramatically before selling off from loftier levels. If so, the iPath Dow Jones-UBS Nickel Total Return ETN (JJN | D-68)—which holds front-month nickel futures contracts—is sure to benefit.