September Sees Global Supply Surpluses Drive Commodity Markets Lower

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Oct 09, 2014, 11:01 ET

NEW YORK, Oct. 9, 2014 /PRNewswire/ -- Commodity performance in September was generally driven by global supply surpluses across multiple commodity sectors, according to Credit Suisse Asset Management.

The Bloomberg Commodity Index Total Return performance was negative for the month, with 18 out of 22 Index constituents trading lower.

Credit Suisse Asset Management observed the following:

Agriculture was the worst performing sector, down 9.54%, led lower by grains, as exceptional growing and harvesting weather has helped support a record crop year.
Precious Metals decreased 7.55%. Gold and Silver declined as the US dollar continued to strengthen. US monetary policy now seems to be on a tightening course, while other major central banks continue to ease.
Industrial Metals declined 6.65%, with all constituents posting negative returns due to weaker than expected Chinese economic data. Chinese officials continued to indicate the government would not be increasing stimulus measures to offset recent economic weakness, potentially decreasing the demand for base metals.
Energy ended the month 4.41% lower, led by Brent Crude Oil, after the International Energy Agency and OPEC both forecasted a weaker outlook for crude oil. OPEC increased its production forecast for non-OPEC producers, while the IEA cut its demand forecast.
Livestock was the best performing sector for the period, up 5.74%, as production of beef and pork remained low.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management said: "September was generally driven by global supply surpluses across multiple commodity sectors. While record levels of production for grain-related commodities led to lower prices for the 2014 crop year, global consumption continues to trend higher. With base level global consumption at much higher levels, any disruptions in future crop years may materially impact prices. Despite expected increases in US shale oil and gas production, natural gas and heating oil inventories are still at multi-year lows, making supplies more susceptible to extreme weather conditions. There were also some early signs of the persistent South American dry weather potentially beginning to impact next year's crops."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "Global growth will be a key factor for commodity demand expectations improving over the long-term. Economic conditions in the US continued to improve, including unemployment. Meanwhile, the European and Japanese central banks continue to add stimulus in an attempt to jump-start their economies. The corresponding strengthening of the US dollar as a result of the divergent paths in central bank policies has undoubtedly weighed on commodities as of late, but this may be a short-term drag. In the medium- to long-term, rising rates and a strengthening US dollar may coincide with improving economic growth. Macroeconomic factors may reinforce themselves, via the sources of inflation or growth surprises, both of which may come in above low expectations."

About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy has been managed for over 19 years 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 September 30, 2014, the Team managed approximately USD 10.7 billion in assets globally.

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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 without obligation to update. 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 a guide to future performance. 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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SOURCE Credit Suisse AG