While the bulls reigned supreme on Wall Street in 2013, bearish pressures kept a lid on commodity prices throughout the entire year as investor rotated out of safe havens and jumped into cyclical equities. Despite the improving economic outlook on the home front, as evidenced by the Federal Reserve’s efforts to start reducing stimulus, demand for natural resources remains lackluster. Worries over China’s slowdown and unfavorable supply conditions remain the key headwinds that will most likely continue to put downward pressures on commodity prices heading into the new year [for more commodity news and analysis subscribe to our free newsletter].
Given the inherently volatile nature of the commodity market, we’re taking the time to reflect on how previous outperformers managed to hold up this time around.
1. Lumber: Up 5.7%
Despite boasting a reputation as one of the best performing hard assets over the past century, lumber prices failed to stage a massive rally in 2013 seeing as how their YTD return is dwarfed by the 38% gain seen in 2012. The ongoing domestic housing market recovery has helped to support demand for this commodity, although many are fearful that rising rates could spell trouble for homebuilders in 2014, which would also create headwinds for lumber prices.
2. Soybeans: Up 1.8%
The droughts of 2012 bolstered agricultural commodities higher across the board as unfavorable growing conditions led to a supply shock and a spike in prices. While soybeans managed to pop 16% in 2012, this year wasn’t as green for the bean; as weather conditions normalized, prices sank to account for the oversupply, leaving soybean prices up slightly for the year.
3. Corn: Down 30.4%
Corn prices surged alongside soybeans in 2012 as drought struck the “Corn Belt” across the Midwestern region of the United States. 2013 welcomed cooler weather, however, which in turn prompted speculators and hedgers alike to reduce their exposure to the yellow grain amid improving growing conditions and falling prices [see also 50 Ways To Invest In Agriculture].
4. Gasoline RBOB: Up 6.1%
RBOB futures posted a gain of 12% in 2012 after enduring a tumultuous stretch of trading clouded with uncharacteristically warm weather and damage from Hurricane Sandy. Gasoline futures have managed to edge higher this year as well, although their 2013 performance grossly trails the returns seen last year [see also Breaking Down the Cost of a Gallon of Gas].
5. Platinum: Down 13.8%
After posting a gain of 7% in 2012, platinum prices followed their precious yellow counterpart lower into 2013. While last year’s mining strike in South Africa helped to bolster platinum prices, the precious metal didn’t see any meaningful catalysts this year to inspire a rally.
Disclosure: No positions at time of writing.