Commodities May Have Struggled, But Bright Spots Exist

Broad commodities have struggled this year. The S&P GSCI Index is down more than 5% year-to-date. However, there are still opportunities when investors dig a little deeper, according to Teucrium’s Senior Portfolio Specialist Jake Hanley.

Jake Hanley of Teucrium

“Commodities have taken it on the chin, generally speaking, in 2023,” he said at a panel on VettaFi’s Alternatives Symposium.

But according to Hanley, a lot of investors “put commodities under one big basket view.” As a result, they can miss out on individual opportunities.

See more: “Agricultural Economists Upbeat for 2024 Commodities Outlook

For example, Hanley noted some bright spots within commodities. In addition to gold, “sugar is [also]a bright spot.” He noted that the Teucrium Sugar Fund (CANE) is up nearly 60% year-to-date.

So, what’s impacting agriculture specifically? According to Hanley, “it’s supply and demand.” And what impacts that? Weather. Droughts, for example, have significantly impacted agricultural prices.

“Weather doesn’t care about price-to-equity ratios,” Hanley said. “Weather doesn’t care about 10% yield.”

Tapping Into the Opportunities Within Agriculture

In addition to touting CANE, Hanley cited a couple more Teucrium funds that can tap into opportunities within agriculture. For example, sometimes investors “don’t want to be long on commodities.” That’s where the long-short Teucrium AiLA Long-Short Agriculture Strategy ETF (OAIA) comes into play.

Meanwhile, the long-only Teucrium Agricultural Strategy No K-1 ETF (TILL) is “a beta play… that offers potential diversification benefits when you need it most.”

When asked what percentage of their average client portfolio was in commodities, most attendees (51%) said less than 5%. This seemed to buttress Hanley’s point about investors needing further education on the asset class.

“Less than 5% is somewhat shocking,” Hanley said in response to the poll results. He added, however, that this “presents an opportunity… to educate folks on why you might consider a long-term strategic allocation to commodities.”

For more news, information, and analysis, visit the Commodities Channel.