** Quarterly Overview**

Q3 Overview 2022 – Q4 Outlook 2022 PDF

Q3-2022 Quarterly Commodity Spreadsheet

Soft Commodities

Soft Commodities Weekly Component Report PDF-11.30.2022

Soft Commodities Weekly Component Report Spreadsheet-11.30.2022

Comments:

Soft commodity prices were mostly higher over the past week, with only FCOJ falling and posting a 2.76% loss. Coffee futures moved 4.39% higher, and cocoa futures gained 2.21%. Cotton futures rose 2.06% and were up the daily limit on November 30. Sugar futures edged 0.41% higher since November 23.  

The total number of open long and short positions moved 1.30% higher in cotton. Open interest in the coffee futures market rose 0.74%. The metric in sugar was 0.41% higher over the past week, and it increased 1.85% in cocoa. FCOJ open interest moved 2.29% higher since November 22.

The Brazilian real was just over 2% higher over the past week, supporting sugar, coffee, and FCOJ prices which remained just above the $2 per pound level.

Trends:

The short-term trends in sugar, coffee, cocoa, and cotton are marginally higher, while FCOJ have corrected from the high after a bullish run. Coffee bounced over the past week and experienced the most significant gain and could be turning higher after finding a bottom at just over the $1.50 level on the continuous futures contract. The volatile cotton futures market also seems to have found at least a short-term bottom.

Recommendations:

  • We are long the CANE ETF product. At $9.47, I rate it a hold.
  • We are long a small position in the JO ETN product. At $48.73, I rate it a hold.
  • We are long two units of the NIB ETN product at an average of $26.29. I rate NIB a hold at $27.02 per share.   

A Final Note

As we head into the final month of 2022, the OPEC and Fed meetings will determine the path of least resistance of markets across all asset classes. Meanwhile, demonstrations in China could set the stage for an economic comeback in the world’s second-leading economy if the government eases the COVID-19 protocols. In a year where the leading stock market indices have posted significant losses, end-of-the-year tax loss selling could impact markets over the coming weeks.

Commodity prices have come down from the 2022 highs, but the potential for future rallies is high. The geopolitical landscape remains tense as the war in Ukraine continues to threaten peace in Europe and causes the divide between the US/NATO and Russia to widen. China could hold the key to the global economy over the coming weeks if the government does not react harshly to the current demonstrations. Meanwhile, the dust has yet to settle in the crypto arena as the saga of the FTX bankruptcy continues to grip the asset class.

I expect another volatile year in the commodities asset class in 2023. I am a buyer of dips in December and will maintain core long positions into 2023.

Thank you for your continued support!

Warm regards,

Andy Hecht

 

 

Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal.  This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.