The Best And Worst Soft Commodity ETPs Of 2012

In the commodity world, active trading reigns supreme; many investors measure their holding period by minutes and hours rather than by weeks and months. Among the most popular items to trade, soft commodities have found a particular niche with those who can stomach their risk. Made up of cocoa, coffee, cotton and sugar, the soft commodities are among the most volatile on the market and, as such, have become a trader’s dream [for more soft commodity news subscribe to our free newsletter].

With 2012 bringing no shortage of inclement weather and geopolitical tensions, these commodities exhibited another 12 months of volatility and unpredictable behaviors. Below, we outline the best and worst performing soft commodity ETPs on the year.

Best: NIB and Cocoa Stay Sweet

Cocoa was by far the best performing soft commodity on the year, and the two ETNs that track it benefited accordingly. In fact, the only soft commodity funds that were positive (or even close to positive) for 2012, were the pair that track this sweet commodity. The top performer was the Dow Jones-UBS Cocoa Total Return Sub-Index ETN (NIB), which jumped nearly 15% for the year. Cocoa futures and their related funds were on a nasty slide at the end of 2011, allowing them to recover a bit this year and put in a solid performance.

Worst: BAL and Cotton Turn Sour

CottonThe Dow Jones-UBS Cotton Total Return Sub-Index ETN (BAL) had an incredible run in 2011, as cotton prices soared to highs not seen for quite some time. Unfortunately, the same cannot be said for 2012, as BAL has been sliding since May of 2011. On the year, BAL surrendered 12.8% and, sadly, was the third-best performer in the softs category. With cotton still reeling from its run in 2010 and 2011, the coming year may see prices hit a more sustainable level and finally take some of the pressure off BAL [see also Why Jim Rogers Still Loves Agricultural Commodities].

Worst: SGG and Sugar Not Far Behind

Sugar was anything but sweet in 2012, as the Dow Jones-UBS Sugar Subindex Total Return ETN (SGG) sank by more than 15% on the year. As is typical of this commodity, SGG had a nice run through the summer months when demand is high, but has since retracted and continued to fall. Look for SGG to heat up come May/June of 2013, as volumes tend to be higher and sugar tends to be more volatile midway through each year.

Worst: Coffee Gets Crushed

No soft took a hit quite like coffee; in fact it’s probably fair to say that few commodities took a hit quite like coffee did. The Dow Jones-UBS Coffee ETN (JO) may have twice the assets ($66 million) of any other ETP in this sector, but its 2012 performance was abysmal. A chart of JO reveals a downhill slope that began in early 2011 and has yet to let up. The ETN has lost more than 42% this year and is showing no signs of turning things around soon.

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Disclosure: No positions at time of writing.

This entry was posted in Agriculture, Asset Allocation, Cocoa, Coffee, Commodity ETF Analysis, Commodity ETFs, Cotton, Sugar. Bookmark the permalink.

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