As we wrap up the third quarter of 2012, many look ahead to finalize their portfolios for the year. By most equity standards, 2012 has been a very successful year, but the same cannot be said for commodities. As always, the commodity industry has picked its darlings and singled out its laggards, making profits for some and drawing up big losses for others. With nine months of the year in the bag, it will be a good time to reassess your holdings to see if it may be the right time to reallocate or if there are more promising opportunities out there [for more commodity news and analysis subscribe to our free newsletter].
Below, we outline three commodities to keep a close eye on for the fourth quarter.
We could technically list grains as a whole for this one, but soybeans futures have by far outperformed the rest of the commodity world this year. After a punishing drought destroyed crop yields across the nation, these futures contracts were able to jump by more than 30%, with soybean meal futures gaining more than 50%. As we enter the harvest season and the winter months, investors will want to keep an eye on this commodity to see if a pullback is in store, or if it still has room to run.
It is no secret that natural gas suffered a crushing blow after 2008, forcing major products like the United States Natural Gas Fund (UNG) to lose more than 98%. But it is also no secret that this fossil fuel went on a tear earlier this year, as a number of supply issues put NG in a pinch and allowed prices to drift higher. Despite starting off the year on a very sour note, NG futures are dangerously close to turning in a positive performance for the year. The colder months will likely mean increased demand for this commodity, making it a key asset to watch [see also 25 Ways To Invest In Natural Gas].
On the reverse side of the agriculture world are the soft commodities: cocoa, cotton, coffee, and sugar. 2012 has not been nearly as kind to these futures as it has to the world of grains. Thus far, cocoa is the only soft to post positive returns (nearly 14%), while cotton, coffee, and sugar have lost 22%, 27%, and 14% respectively. While these commodities will be good to watch, you will be best served by picking one to focus on, given that all four of these assets have very different price drivers and are produced in various nations all around the world.
Disclosure: No positions at time of writing.