Commodities rising, posting gains into 2020

Energy, agricultural commodities, livestock and metals have all risen higher in January, according to observations from Credit Suisse Asset Management. The largest gain of course was in the energy sector that grew by 6.89% amid crude oil and petroleum products rising following OPEC’s announcement of new production quotas for 2020 in an attempt to rebalance sagging oil markets. “Escalating geopolitical tensions in the Middle East also has the potential to shock the energy complex,” said Nelson Louie, global head of commodities for Credit Suisse Asset Management. “The rapid escalation of tensions between the U.S. and Iran may put oil infrastructure of U.S. allies in the region at risk, including key oil shipping channels as well as production and refining facilities in Iraq or elsewhere in the Middle East.” Agriculture returned 5.75% over the last month, officials added. Soybean Oil rose as Indonesia and Malaysia plan to increase crude palm-oil (CPO) content in biodiesel in 2020 while Malaysian palm oil production declined more than expected, raising the demand for soybean oil as a cost-effective substitute. Also industrial metals increased by 3.88% as the U.S. dollar declined following soft U.S. economic figures in November that sparked buying of gold and silver. Another impact for commodities of course is the ongoing trade tensions between the U.S. and China. Louie added that due to the length of the trade war, it may take time for U.S. suppliers to re-establish supply chains to China. Lower trade barriers though will improve global growth forecasts and in turn support commodity demand. Industrial metals were up 3.06% with gains in copper as Chinese authorities reiterated their commitment to supporting domestic economic growth in 2020, according to Credit Suisse. Livestock lagged, but still rose 1.55%. The price of lean hogs in particular rose after Chinese officials announced their plans to lower tariffs on U.S. frozen pork imports amid improving trade relations between the U.S. and China. “In macro-economic related news, the Chinese economy showed signs of improvement during the month, highlighted by larger-then-expected, year-over-year increases in industrial production and retail sales for November,” said Christopher Burton, senior portfolio manager for the Credit Suisse Total Commodity Return Strategy. “However, economic readings in the U.S. were less supportive of an improved growth outlook as U.S. jobless claims and key indicators of the U.S. manufacturing sector underperformed expectations.” The Credit Suisse Total Commodity Return Strategy implements spot return, roll yield and collateral yield trades. As of year end, the team oversaw $6.4 billion in assets globally.

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