By Christine Marie Nielsen
The Dow Jones-UBS Commodity Index ended down 2.22% for the month of November as concern escalated that the European debt crisis could curb global economic growth and dampen demand for commodities in the future. Contracts also suffered from supply and demand issues.
The three most significant downside performing single-commodity indexes were cocoa, natural gas and cotton, which were down 15.85%, 12.48%, and 10.81% respectively, in November.
Plans in the Ivory Coast for a state-controlled cocoa body was seen as a bearish force for the cocoa market. The authority’s roles could include marketing, and there was worry that it may sell up to two crops in one marketing season.
Natural gas prices were under pressure during the month of November as mild weather in key gas consuming regions in the U.S. limited early season heating demand.
Cotton prices fell in November as market participants eyed a November 9 forecast by the U.S. Department of Agriculture that global cotton production would rise 7.5% for the year ending July 31, and demand would drop to a three-year low.
The Dow Jones-UBS Single Commodity Indexes for crude oil, orange juice and zinc had the strongest gains during November, with month-end returns of 7.82%, 3.99%, and 3.39%, respectively.
Crude oil prices extended higher in November as tensions continued between Iran and the west and the possibility of more stringent sanctions loomed. While it’s nothing new that issues associated with Iran’s nuclear program impact the oil market, an International Atomic Energy Agency (IAEA) report released during the month highlighted concerns over the “possible military dimensions” of Iran’s nuclear program. In a November 30 comment, Barclays Capital researchers said the IAEA report does seem to raise the stakes, and the situation “has been added to a policy arena that has become more fevered.” Barclays Capital researchers noted that “sanctions have been ratcheted higher and Iran has moved swiftly to retaliate.”
Orange juice participants reacted to word that inventories declined and U.S. exports rose. The Florida Department of Citrus said on November 21 that U.S. shipments of orange juice climbed to 220.05 million gallons for the season ended September 30, up from 136.67 million a year earlier. Strong technical factors in the market also supported trade.
Zinc market prices rose in November on word some U.S. industry activities improved in the previous month. Total industrial production for October was 3.9% above its year-earlier level.
Year to date, the Dow Jones-UBS Commodity Index was down 10.00% with the Dow Jones-UBS Gas Oil Sub-Index posting the highest gain, 24.45%, so far in 2011. The Dow Jones-UBS Wheat Sub-Index had the most significant year-to-date slide, plunging 37.93%. Egypt, the world’s largest wheat importer, ignored a U.S. offer and purchased wheat from the Black Sea region as Russia, Ukraine and Kazakhstan made their way into the global wheat market.
