The Dow Jones-UBS Commodity Index was up 0.04% for the month of November as positive macro developments - including an agreement by Eurogroup leaders to release the next tranche of aid to Greece in December and an attempt in the U.S. to find a solution to the fiscal cliff situation - buoyed markets.
According to research released by Barclays on Nov. 30, upside surprises in U.S., China and Euro November “flash” Purchasing Managers’ Index data also were a supportive factor.
The three most significant upside performing single commodity indices were orange juice, tin and aluminum, which had month-end returns of 15.73%, 9.69% and 9.62%, respectively.
Orange juice futures prices in November bounced to a month high as market participants considered a higher-than-average probability of a damaging freeze in citrus-growing areas of Florida over the next few months. The price move was further supported by what many had pegged as oversold conditions.
An upward trend was in place for base metals prices for the majority of the month. Figures from the housing market that indicated the sector has improved going into year end were eyed by market participants. In October, the biggest year-over-year monthly increase in U.S. home sale prices was seen since June of 2006. Indeed, luxury homebuilder Toll Brothers (NYSE:TOL) said both its profit and revenues rose sharply in its fiscal fourth quarter, as a rise in consumer confidence encouraged buyers to jump back into the housing market.
According to the Nov. 30 research from Barclays, in order for the move higher in base metal prices to be sustained, two critical factors are important. First, “the short-term positive momentum in macro data and developments needs to be sustained for more than just a short period.” Second, and according to Barclays perhaps most important, “there need to be clearer signs that demand fundamentals in China are improving at a pace that is enabling an erosion of the generally significant surplus built up this year for most base metals.”
The three most significant downside performing single commodity indices were soybean meal, soybean and natural gas, which ended the month down 8.48%, 7.10% and 6.78, respectively.
Soybean and soybean meal prices got a lift from forecasted record high South American bean production and strong export demand for U.S. soybeans and soy oil.
Natural gas prices were pressured by an enormous amount of gas in storage and consistently high gas production levels thanks largely to shale formation gas wells.
Year to date, the Dow Jones-UBS Commodity Index is up 1.51% with the Dow Jones-UBS Soybean Meal Subindex posting the highest gain of 52.76% so far in 2012. Dow Jones-UBS Coffee Subindex has the most significant downside YTD performance, down 38.88%, due largely to expectations for a higher yielding crop year in Brazil