The Picture Book of Commodity Stocks

By Brad Zigler

Real-time Monetary Inflation (per annum): 8.4%

Watching the commodities markets over the past week got me thinking of a classic Judith Viorst book I used to read aloud to my toddler kids. "Alexander and the Terrible, Horrible, No Good, Very Bad Day" told how Viorst's elementary school everyman, er, everyboy, dealt with a string of disasters over the course of a singularly bedeviling day.

Seems to me that traders in the corn pit would have gladly suffered gum in their hair, like Alexander, if they could have ducked the buffeting of the past week's market. Corn traders weren't the only ones whipsawed, though. Other agricultural commodities have also been taking it on the chin.

Witness the resurgent relative strength of the Market Vectors Agribusiness ETF (NYSE Arca: MOO). Compared to the futures comprising the PowerShares DB Agriculture Fund (NYSE Arca: DBA) - corn, soybeans, sugar and wheat - ag stocks seem to be doing quite well.

Commodity Stocks' Relative Strength

MOO's outperformance has as much to do with futures' weaknesses as it does with strength on the equity side. Case in point: Old crop corn took a nearly 15% drubbing since June 23 (that's through Monday's close; it's being beat up further this morning). Wheat's off nearly 10% in the same time. Sugar and beans are up modestly, but nowhere near enough to overcome the grains' downdraft. Bottom line: DBA's dipped 1.9% over the past two weeks.

Ag stocks, meanwhile, rose by a similar amount despite the lackluster performance of the broader equity market. The S&P 500 picked up only a half-percentage point since June 23.

So, ag stocks have regained the momentum developed this past spring, while the grain market's peaked and faltered.

Agribusiness issues, though, are the bright spot on the commodity stock horizon. The broader universe of commodity stocks, most notably those comprising the Market Vectors RVE Hard Assets Producers ETF (NYSE Arca: HAP), are in a funk. HAP tracks companies dealing in six hard assets sectors: agriculture, energy, base metals, precious metals, forest products and water/renewable energy sources. In June, HAP began to cede ground to the 17 commodity futures proxied by the GreenHaven Continuous Commodity Index Fund (NYSE Arca: GCC).

HAP's taking a nearly 1% hit this morning, so if little Alexander isn't having a bad day, holders of the hard asset fund may be.