Commodities, represented by the broad-based S&P GSCI, rose 6.7% in October on the back of strength in the petroleum complex. During the month, the director of the International Energy Agency said the world is in the middle of “the first truly global energy crisis.” All petroleum constituents rose by double-digit percentage points. Livestock also rose, while agriculture, industrial metals and precious metals were flat or down.
The S&P GSCI Heating Oil was the hottest energy commodity, rising 23.56% last month. Backwardated futures curves across energy commodities continued to be one of the major tailwinds behind the strength of the market. U.S. President Biden threatened to raise taxes on oil companies if they do not work to lower gasoline prices by increasing production. The president of the American Petroleum Institute stated, “increasing taxes on American energy discourages investment in new production, which is the exact opposite of what is needed.”
The S&P GSCI Agriculture was a mixed bag of grains in October. The S&P GSCI Corn rose 2.39% and the S&P GSCI Soybeans rose 3.52%, while the S&P GSCI Wheat fell 3.96%—all of which were slight reversals compared to the prior month. The wheat market continued to gyrate in tandem with news surrounding the Ukraine-Russia grain deal. Lower projected corn and soybean yields in the U.S. increased bullishness in those grains when the World Agricultural Supply and Demand Estimates (WASDE) was released mid-month.
Industrial metals posted mixed performance in October. In particular, the slowdown of the Chinese economy has negatively affected metals. The only industrial metal without double-digit YTD underperformance was the S&P GSCI Nickel, which was up 5.79% YTD, but well off the highs from the start of the Ukraine-Russia conflict. That said, both the S&P GSCI Nickel and S&P GSCI Aluminum rose 3.4% for the month. These two industrial metals make up a combined 50% of the current metal cost in an average electric vehicle, according to S&P Global Commodity Insights’ latest biannual research.
The S&P GSCI Gold fell for the second month in a row, off 1.56% in October, as the U.S. Fed continued to hike rates to fight inflation. A hawkish monetary policy is the enemy of a non-yielding asset such as gold.
The S&P GSCI Lean Hogs rose 11.76% in October. Prior to this month, it was roughly flat for the year. This increase is an outlier compared to the usual seasonal lows seen historically in October. A surge in pork belly prices has helped drive performance, although ample supplies may lower enthusiasm in the market for the rest of the year.
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