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Commodities Declined on Crop Surpluses and Low Base Metals Demand

Commodities declined as beneficial weather increased supply expectations for crops and as the trade conflict between the US and China continued to weigh on base metals demand expectations.


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The Bloomberg Commodity Index Total Return declined for the month, with 18 out of 23 constituents posting losses.

Credit Suisse Asset Management observed the following:

  • Industrial Metals decreased 3.42% as trade negotiations between the US and China continued without a clear trade deal in sight. This development, paired with a reduced global growth outlook by the International Monetary Fund, reduced base metals demand expectations broadly.
  • Agriculture declined 3.34%, led lower by Wheat, after strong crop yield prospects in Russia, the EU, and the US increased global supply expectations.
  • Livestock fell 2.33%, led down by Live Cattle, after an USDA report revealed higher-than-expected feedlot placements during March, increasing supply expectations.
  • Precious Metals decreased 0.88% amid positive US economic data, which weakened the attractiveness of both Gold and Silver as alternative stores of wealth.
  • Energy gained 4.29%, led higher by Crude Oil and petroleum products, as supplies continued to tighten amid ongoing US sanctions on Iran and lower production out of Venezuela.


Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: “Negotiations continued towards a trade agreement between the US and China as additional meetings between their delegations were announced near month end. Any near-term deal would be advantageous to various industries dependent on international market demand and may improve the global growth outlook, encouraging more demand for most commodities. In the meantime, the African swine fever outbreak in Asia has already forced China to purchase more US pork products to meet domestic demand. If conditions worsen, China may have to quickly ramp up US pork imports along with commodities used as feedstock. Elsewhere, the US announced it would allow the Iranian oil import waivers to expire in May. How Saudi Arabia and its allies react will be key in terms of how oil prices respond in the near term. After having increased production too quickly at the end of 2018, when sanctions were re-imposed on Iran, key parties will likely want to be more patient. However, they will also be under pressure to increase production should prices rise sharply.”

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: “First quarter GDP readings for the US, European Union, and China surprised to the upside, though other economic indicators for all regions remained mixed. Within the US, markets are pricing in a benign inflation environment, running near 2% for the foreseeable future. The Fed has signaled it will maintain its patient stance before taking meaningful action, with the agency under significant pressure to keep monetary policy accommodative, though higher-than-expected inflation could force the Fed to change policy plans. China’s manufacturing PMI fell in April, while better-than-expected Industrial Production data was largely attributed to looser credit standards and other stimulus measures enacted by the Chinese government earlier in the year. In the Eurozone, Germany faced a slowdown in its manufacturing sector while France’s stimulus measures may have helped the pace of new business investments. Comments from the ECB indicated the potential for further weakness in the Eurozone’s economy, though it highlighted the availability of other tools to attempt to support growth. Central banks appear to remain at the ready to enact more accommodative and nonconventional policies.”

About the Credit Suisse Total Commodity Return Strategy

Credit Suisse’s Total Commodity Return Strategy is managed by a team with over 35 years of combined 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 April 30, 2019, the Team managed approximately USD 7.1 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’). Our strategy builds on Credit Suisse’s core strengths: its position as a leading wealth manager, its specialist investment banking capabilities and its strong presence in our home market of Switzerland. We seek to follow a balanced approach to wealth management, aiming to capitalize on both the large pool of wealth within mature markets as well as the significant growth in wealth in Asia Pacific and other emerging markets, while also serving key developed markets with an emphasis on Switzerland. Credit Suisse employs approximately 46,200 people. The registered shares (CSGN) of Credit Suisse AG’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 www.credit-suisse.com.

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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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