How Have Commodities Compared in 2008?
We have all heard the headline reports about energy prices skyrocketing in 2008, but what have the other commodities been doing in terms of percentage returns? Let’s take a quick look at Agriculture, Metals, Energy, Livestock, and the CRB Index for their standing now that half of the year has passed.
Commodity Percentage returns so far in 2008:
Line Graph showing monthly progression for 2008:
It’s no surprise that energy prices are up over 50% for the year, and that broader commodities are up as well.
If these trends should continue (and that is a big “if”), we could see energy prices up by 100% per year and the other major commodities up around 30% for the year. I suspect the Federal Reserve will attempt to step in through raising interest rates, as many have speculated, before this scenario becomes a reality.
Nevertheless, commodities experienced a decent surge (some over 30%) in the first three months of 2008 before falling as the Stock Market ‘bottomed’ in March. Money flowed back into stocks until late May, while the price of energy (mostly driven by crude oil) climbed almost non-stop for the year so far.
Continue to keep your eye on these broader based commodities, and the division between them for clues on what may be happening beneath the surface (yes, there are many other commodities other than crude oil).
Corey,
You are right to point out that investors and traders need to keep an eye on the other members of the comodity universe.
The trends in commodity markets are likely to continue upward for the forseeable future because so many food inventories are at 60 year lows.
Just look at the urgency shown by the multilateral institutions with recently convened summits of the United Nations Food and Agriculture Organisation in Rome and then the G8 summit in Japan.
Robert Zoellick, Head of the World Bank, has urged prducer nations, notably the US, to reform their biofuels policy , given the massive impact biofuel production is having on grain prices, particularly corn.
An internal World Bank report suggested that this policy was responsible for up to 75% of the increase in food prices.
And then in the industrial metals, the Anglo-Australian miner Rio Tinto has said that it sees very strong markets going forward for its main three products, namely aluminum, iron ore and copper.
This view is based mainly on the rapid projected growth in urbanisation in the emerging economies, notably China and India. It sees growth rates in urbanisation in these countries hgher than overall GDP growth.
And now with fears caused by Freddie Mac and Fannie Mae and the rapidly falling dollar, with a real prospect of stagflation, precious metals, notably gold, are likely to move forward strongly.
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