November’s Worst Commodity Nightmare

Unfortunately for commodities, there’s no waking up from this nightmare. It’s real. Since 1970, the S&P GSCI has never seen a Nov. with as many as 21 negative commodities. After a glimmer of hope in Oct., only 3 commodities, sugar, cotton and cocoa are on track to be positive in Nov. In other words, for every one commodity that is positive, seven are negative in Nov., 2015.

Source: S&P Dow Jones Indices. Data ending Nov. 27, 2015.

Source: S&P Dow Jones Indices. Data ending Nov. 27, 2015.

Moreover, Nov. 2015 is the 5th worst Nov. on record since 1970, only behind 1997, 1998, 2008 and 2014. Year-to-date, the index is also on pace to be the 5th worst year with 1998, 2001, 2008 and 2014 losing more. Though YTD through Nov. 2014, the index was in better shape than the index is through this Nov.

Source: S&P Dow Jones Indices. Data ending Nov. 27, 2015.

Source: S&P Dow Jones Indices. Data ending Nov. 27, 2015.

While 2015 is not the worst year for any single commodity despite 2 down more than 40%, 7 down more than 30% and 13 down more than 20% (more than half in a bear market for the year), there are a number of commodities setting notably bad years. Aluminum, feeder cattle, Kansas wheat, nickel, and the industrial metals sector are all posting their worst years after 2008. Below is a table showing the rank of worst years since 1970 (for example, aluminum is having its second worst year in history and gold is having its sixth worst year in history):

Source: S&P Dow Jones Indices

Source: S&P Dow Jones Indices

Last, it is worth mentioning that 20 of the 24 commodities are in contango. Although this is the highest number since Nov. 2013, there have been 23 other months in history where 20 or more commodities have been in contango together. However, November is the worst month on average of any of the twelve months for having the most commodities in contango. It is the only month that has more than half on average (12.4) in contango, and of the 24 months in history having 20 or more commodities in contango, 7 have occurred in the month of November. Contango has had a significant cost, erasing almost an additional ten years of gains, for commodity investors rolling the first nearby most liquid contracts. Notice the spot index is only at the Feb. 2009 level, while the total return is at the Jun. 1999 level.

Source: S&P Dow Jones Indices

Source: S&P Dow Jones Indices

 

 

 

 

 

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