UBS AG said April 2 that the commodities supercycle has ended and that returns are unlikely to match the performance of the past decade, joining Citigroup, which called the end to the cycle in November. There will be “many more losers than winners” for commodities this quarter, Citigroup analysts including Edward L. Morse, the bank’s global head of commodities research, said in an April 12 report.
The S&P GSCI gauge surged 170% from the end of 1999 to Dec. 31, 2009, the most of any decade since the data begins in 1971. China’s economy expanded almost fivefold and mining companies, farmers and energy producers struggled to keep up. Prices are now dropping as supply surpluses emerge in everything from copper to sugar to cotton.
Wagers on a rally in crude oil slid 4.4% to 196,330 contracts, the first drop in four weeks, the CFTC data show. Bullish platinum holdings slumped 12% to 22,053, the lowest since September. Those for palladium retreated 18%, the most since October.
A measure of net-longs for 11 U.S. farm goods tumbled 45% to 56,404 contracts, the lowest since Sept. 19, 2006, CFTC data show. Investors are holding a net-short position of 83,340 contracts in sugar, the most since at least 2006, when the data begins.
Bullish corn positions plunged 46% to 50,977 contracts, the lowest since June. Soybean wagers dropped 19% to 62,600 futures and options, the least since January 2012. Investors are holding a net-short position for wheat of 22,094 contracts, compared with 35,026 a week earlier. The funds have bet on declines since mid-December.
World stockpiles of wheat before this year’s Northern Hemisphere harvest will total 182.26 million tons, more than the 178.23 million forecast in March, the U.S. Department of Agriculture said April 10. Analysts surveyed by Bloomberg expected 178.82 million. Prices have plunged into a bear market on signs that global demand is slowing and farmers will boost output in the next year.
“Commodities are falling from worry about demand globally,” said Dan Denbow, a fund manager at the $1.6 billion USAA Precious Metals & Minerals Fund in San Antonio. “The faithful have been pulling back a bit. Prices are going to be dominated by what’s going on with the economic releases and what’s going on with the Fed. Gold is caught between being a safe-haven asset and a stable-value asset.”