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Commodities Rose on Production Concerns


Commodities rose in January as adverse weather conditions threatened the production of various commodities, according to Credit Suisse Asset Management.

The Bloomberg Commodity Index Total Return performance was positive for the month, with 14 out of 22 Index constituents posting gains.

Credit Suisse Asset Management observed the following: 

  • Energy increased 4.51% as global inventories of crude oil and petroleum products continued to tighten amid strong demand. Natural Gas rose as frigid winter weather hampered output at the Appalachian and Permian Basins while simultaneously increasing heating demand.   
  • Precious Metals gained 1.93% as the US Dollar continued to weaken.
  • Agriculture rose 1.35%, led higher by Wheat, as dry and freezing weather conditions threatened crop yields across the US Great Plains.   
  • Industrial Metals increased slightly by 0.22%, as the sector was broadly supported by stronger-than-expected US manufacturing data for January and amid US Dollar weakness.
  • Livestock declined 1.29%, led lower by Lean Hogs, due to US production and inventories increasing versus last year. 

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: “The beginning of 2018 ushered in below freezing temperatures and hazardous winter conditions for a large portion of the US. Natural gas heating demand spiked while production in the Northeast and Texas was hindered. End-of-month inventories came in below the five-year historical average, relieving some concerns of a supply glut. The freeze made it a challenge for cattle to maintain their weight and forced farmers to spend more on grains for feed. However, frigid temperatures did not bring along snow cover in the US Grain Belt, leaving young wheat crops without their winter protection. Another cold snap late into the winter season could hamper beef output levels in the future and threaten crop yields further.

Beyond the weather shock, natural gas pipeline construction projects that were scheduled to be completed in the first quarter of this year faced additional regulatory hurdles, delaying relief to supply bottlenecks in the US Northeast. In addition, the country’s second Liquefied Natural Gas export facility in Maryland faced construction issues, causing additional supplies to remain on US soil. Elsewhere in Energy, stronger-than-expected crude oil and petroleum demand along with high compliance rates to the OPEC-led production cuts continued to help with the global rebalance. US production continued to grow, though exploration and production companies have showed more restraint than in the past in terms of expanding production so far.”

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: “Globally, major economies are showing synchronized growth, which may encourage central banks to slowly tighten while still remaining accommodative. The Bank of Japan surprised markets after it unexpectedly decreased the amount of government bonds it purchased, providing evidence that the Japanese government may be slowly beginning to taper its quantitative easing program. Within the US, a combination of wage growth and rising consumer spending has increased inflationary pressures. At the beginning of the month, inflation expectations rose to over 2%, above the stated target by the US Federal Reserve (Fed). Consumer confidence levels reduced slightly, but still remains near its highest levels since the financial crisis. The new Fed Chair Jerome Powell is largely expected to keep in line with Janet Yellen’s dovish and cautious policy style. However, continued higher inflation readings may force the Fed to react more quickly to prevent an overheating of the US economy.”

About the Credit Suisse Total Commodity Return Strategy

Credit Suisse’s Total Commodity Return Strategy is managed by a team with over 32 years of experience, and seeks to outperform the return of a commodities index, such as the Bloomberg Commodity Index Total Return or the S&P GSCI Total Return Index, using both a quantitative and qualitative commodity research process. Commodity index total returns are achieved through:

  • Spot Return: price return on specified commodity futures contracts;
  • Roll Yield: impact due to migration of futures positions from near to far contracts; and
  • Collateral Yield: return earned on collateral for the futures.

As of January 31, 2018, the Team managed approximately USD 8.9 billion in assets globally.  

Credit Suisse AG

Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ’Credit Suisse’). As an integrated bank, Credit Suisse offers clients its combined expertise in the areas of private banking, investment banking and asset management. Credit Suisse provides advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 46,720 people. The registered shares (CSGN) of Credit Suisse’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at

Important Legal Information

This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.

Certain information contained in this document constitutes “Forward-Looking Statements” (including observations about markets and industry and regulatory trends as of the original date of this document), which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe”, or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties beyond our control, actual events, results or performance may differ materially from those reflected or contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on such statements. Credit Suisse has no obligation to update any of the forward-looking statements in this document.

Certain risks relating to investing in Commodities and Commodity-Linked Investments:  Exposure to commodity markets should only form a small part of a diversified portfolio. Investment in commodity markets may not be suitable for all investors. Commodity investments will be affected by changes in overall market movements, commodity volatility, exchange-rate movements, changes in interest rates, and factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Commodity markets are highly volatile. The risk of loss in commodities and commodity-linked investments can be substantial. There is generally a high degree of leverage in commodity investing that can significantly magnify losses. Gains or losses from speculative derivative positions may be much greater than the derivative’s original cost. An investment in commodities is not a complete investment program and should represent only a portion of an investor’s portfolio management strategy.

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