Green Shoots Everywhere

DECEMBER 4, 2020

Commodities are under-supplied and prices are rising broadly

The title above may appear somewhat surprising given that Commodity indices, despite strong rallies in recent months, are still negative this year with the Rogers International Commodity Index® (RICI®) and the Bloomberg Commodity Index at -12% and -7.7% respectively.  However, when we look into the components; it is evident that only the energy sector is lagging thus far in 2020.   

In fact, despite a US GDP that has contracted approximately 3.5%, the non-energy components, representing 60% of the weighting in the RICI®, have rallied broadly this year! How and why is this the case? The answer lies in the supply side as many commodities are in structural deficits, have low inventories and/or declining reserves. This is in large part due to the multi-year reduction in capital expenditures and the tightening of the supply chains that accelerated during 2020 in response to the COVID related downtrurn.

  • The metals sector of the Rogers International Commodity Index® is up approximately 15.00% YTD with very broad participation across both industrial and precious metals!
  • The Agricultural sector of the Rogers International Commodity Index® is up 8.00% YTD also with broad participation amongst its many components.


There are a number of potential macro trends that appear to be lining up for the commodity asset class which is already facing tight supplies globally

  • The economic rebound in 2021 and beyond as the economy finally opens up after the COVID related global downturn
  • Weakening dollar due to the massive monetary stimulus in the US
  • Recovery of worldwide mobility and the impact on energy prices
  • Renewed focus on fiscal stimulus for much needed infrastructure here in the US and abroad
  • The potential for inflation to finally manifest itself consistent with the goal of the Federal Reserve

Goldman Sachs Forecasts Structural Bull Market in Commodities

US Global Investors – Looks for a 2021 Commodity Bull Market


The RICI® has significantly outperformed the BCOM by over 250 BP per annum since inception in August of 1998. In fact, 2020 is the first year since 2015 that the RICI® has not outperformed the BCOM which, as seen below, is an opportunity for investors. Based on history, the RICI® is poised to significantly outperform.

The Rogers International Commodity Index®: A Global Demand-Based Portfolio

The RICI® is a composite, US dollar-based, total return index methodology. It represents the value of a basket of commodities consumed in the global economy, ranging from Agricultural to Energy and Metal products. The Index’s weights attempt to balance consumption patterns worldwide (in developed and developing countries) and specific contract liquidity. The value of this basket is tracked via futures contracts on 38 different exchange-traded physical commodities, quoted in four different currencies, listed on nine exchanges in four countries.

(To access additional management commentaries & reports please visit our web site for Financial Advisors and Institutions by clicking here. For further insights visit our Commodity Curve Blog.)

DISCLAIMER: The index returns shown above do not represent the results of actual trading of investible products, assets or securities. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available only through investable instruments based on that index and there can be no assurance that investment products based on the index will provide returns that are similar to the actual index performance or provide positive investment returns. All the indices referred to in this presentation above are not investable products and their returns do not reflect the fees and charges inherent in investing in a vehicle designed to replicate a particular index. Any index performance provided is for illustrative purposes only. The time period selected represents the inception date of the Rogers International Commodity Index® and is intended to provide a historical long-term average. Data provided by Bloomberg LP, BarclayMAP, and RBC Wealth Management. Past performance is not indicative of future performance

Alan Konn

Partner & Managing Director of Price Asset Management