This past year has certainly been a volatile one for the commodity space, but the majority of these assets has been able to net a positive return on the year. Lumber and soybeans led the pack, as each appreciated more than 35% for the year. But bringing up the rear are a few commodities who are no strangers to volatility and weak performances. Below, we outline the five worst performing commodities of 2012 to give investors a better idea of how the year shaped up [for more commodity news and analysis subscribe to our free newsletter].
As markets prepare for another four years of Barack Obama, it is safe to say that trading has been anything but smooth. With most benchmarks suffering a poor string of sessions last week, many are looking to the near-term or have focused on exactly what happened last week. But with commodity investing, it is always important to take a look at longer-developing trends, as they can often signal how a particular asset will perform in the near future [for more softs news and analysis subscribe to our free newsletter].
When it comes to futures investing, contango and backwardation are two phenomenons that traders should always keep an eye on. Backwardation is simply the process whereby near month futures are more expensive than those expiring further into the future, creating a downward sloping curve for future prices over time [for more commodity futures news and analysis subscribe to our free newsletter].
Sugar is one of the most highly coveted soft commodities in the world, as its consumption and production make up a large part of many emerging market economies. As an investment, sugar futures and related products have a high attraction among investors as they offer significant volatility and potentially strong gains (or, of course, losses). Though this sweet commodity followed its historical trend of spiking in early summer, the past few weeks have been mostly sour for sugar, as the commodity has racked up losses of nearly 17% [for more sugar news and analysis subscribe to our free newsletter].
Over the years, sugar has grown to be one of the most widely used soft commodities in the world with its number of applications going well beyond simple food production. As with all agricultural investments, sugar is known to exhibit significant volatility, making the commodity a lucrative investment tool for those looking for a sweet return. Additionally, sugar has been shown to maintain a fairly low correlation to other asset classes, such as stocks, giving investors yet another option to add meaningful diversification to their portfolios [for more sugar news and analysis subscribe to our free newsletter].
Sugar is another of the so-called breakfast commodities, along with coffee, cocoa and orange juice. Like the others, it also has a rich history. It is thought to have been first used by humans in Polynesia many centuries ago, but was not discovered by Europeans until the 11th century thanks to the Crusades. It was first brought to the Americas by Columbus in 1493 and soon thereafter it was found that the sugar cane plant grew extremely well in tropical environments [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later].
As far as soft commodities are concerned, sugar futures offer a compelling investment thesis, as their solid liquidity and high volatility make them ideal for active traders looking to make a profit. The commodity is also well-known for sticking to a relatively consistent seasonal pattern, allowing for its movements to be somewhat predictable depending which harvest season is upcoming. However, in the grand scheme of things, many traders may focus their efforts on the more popular commodities like natural gas and gold. For those looking to make a play on sugar contracts, we detail how to trade futures on this soft commodity [see also Beginner's Guide To Commodities].