By Sumit Roy
Has oil moved into backwardation yet? What does corn’s roll yield look like? How do you know when it’s time to buy or sell?
Each week, we investigate the futures curves of the U.S.’ most important commodities, helping investors better understand the market and seize buy-and-sell opportunities as soon as they arise. To see current contango curve and front-month roll costs for each of our selected commodities, please select a sector or commodity below (or read the whole report):
Data from April 25, 2011 to April 29, 2011
Data courtesy IndexUniverse.com
Energy | Agricultural Commodities |
Precious Metals | Soft Commodities |
Industrial Metals |
Energy
CONTANGO WATCH: Neither WTI prices nor the shape of the WTI forward curve changed much from a week ago; we still see contango for the next four contract months and backwardation thereafter.
ROLL COSTS: Front-month annualized roll costs rose just slightly to 5.4 percent from 5.03 percent.
BOTTOM LINE: Contango to Backwardation
CONTANGO WATCH: The Brent forward curve flattened as prices maintained their elevated levels.
ROLL COSTS: At 2.17 percent, investors net slightly less than last week on the front-month Brent roll.
BOTTOM LINE: Backwardation
CONTANGO WATCH: As natural gas prices rallied notably this past week, the commodity’s forward curve steepened just a bit.
ROLL COSTS: Annualized roll costs edged up to 17.33 percent from 15.72 percent last week.
BOTTOM LINE: Contango
Precious Metals
CONTANGO WATCH: The gold forward curve steepened as the metal’s price surged to new records this past week.
ROLL COSTS: Annualized front-month roll costs rose fourfold to 1.01 percent.
BOTTOM LINE: Mild Contango
CONTANGO WATCH: The silver forward curve flattened a bit more this week. We still see mild contango at the very front end, but much of the back end is in mild backwardation.
ROLL COSTS: Annualized roll costs fell just slightly to 0.19 percent from 0.23 percent.
BOTTOM LINE: Mild Contango to Mild Backwardation
CONTANGO WATCH: The platinum forward curve shifted significantly at the front end, with the entire curve now back in contango.
ROLL COSTS: Annualized roll costs have returned now to a more typical 1.07 percent.
BOTTOM LINE: Mild Contango
CONTANGO WATCH: The shape of the palladium forward curve didn’t change much this past week. It remains in mild contango.
ROLL COSTS: Front-month annualized roll costs for palladium contracts increased slightly to 2.45 percent from 2.37 percent.
BOTTOM LINE: Contango
Industrial Metals
CONTANGO WATCH: The copper forward curve has continued to steepen for several weeks now, even as prices remain range-bound.
ROLL COSTS: Copper roll costs edged higher to 1.17 percent from 0.96 percent last week.
BOTTOM LINE: Mild Contango
CONTANGO WATCH: The shape of the aluminum forward curve was little changed from last week, with backwardation at the very front end and contango thereafter.
ROLL COSTS: Investors still net a positive 2.36 percent yield from rolling front-month aluminum contracts, however.
BOTTOM LINE: Backwardation to Contango
CONTANGO WATCH: Zinc remains in steady contango through the entire forward curve.
ROLL COSTS: Zinc roll costs fell to 1.62 percent from 2.32 percent.
BOTTOM LINE: Steady Contango
CONTANGO WATCH: The lead forward curve steepened further on the very front end.
ROLL COSTS: Investors net an attractive 7.41 percent from rolling front-month lead contracts, up from 5.81 percent last week.
BOTTOM LINE: Backwardation
CONTANGO WATCH: The nickel forward curve remains in mild contango before shifting to steady backwardation for the August 2011 contract and beyond.
ROLL COSTS: Investors pay a 0.36 percent annualized cost to roll front-month nickel, the same as last week.
BOTTOM LINE: Mild Contango to Backwardation
CONTANGO WATCH: The shape of the tin forward curve was essentially unchanged week-over-week.
ROLL COSTS: Front-month roll costs decreased to a modest 0.41 percent from 0.48 percent last week.
BOTTOM LINE: Mild Humpbacked Contango
Agricultural Commodities
CONTANGO WATCH: As prices plunged last week, the corn forward curve flattened significantly.
ROLL COSTS: Annualized corn roll fell to 4.05 percent, or nearly a third of last week’s levels.
BOTTOM LINE: Contango to Backwardation
CONTANGO WATCH: The wheat forward curve maintained its steepened state.
ROLL COSTS: Wheat’s annualized front-month roll costs fell a bit to 63.08 percent from 67.82 percent last week.
BOTTOM LINE: Steep Contango
CONTANGO WATCH: Like corn, the soybeans forward curve flattened significantly on the front end.
ROLL COSTS: Annualized soybeans roll costs fell to 1.08 percent, well below last week’s 8.34 percent level.
BOTTOM LINE: Contango to Backwardation
CONTANGO WATCH: The very front of the live cattle curve remains in backwardation.
ROLL COSTS: The live cattle roll yield increased to an attractive 17.53 percent from last week’s 15.05 percent.
BOTTOM LINE: Backwardation to Contango
CONTANGO WATCH: The lean hogs forward curve flattened significantly last week.
ROLL COSTS: In turn, investors net much less than last week by rolling front-month lean hogs contracts. Now they make only 0.63 percent.
BOTTOM LINE: Mild Contango to Backwardation
Soft Commodities
CONTANGO WATCH: The coffee forward curve saw a notable flattening on the front end.
ROLL COSTS: Annualized front-month roll costs for coffee fell significantly to 2.02 percent, down from 14.24 percent last week.
BOTTOM LINE: Humpbacked Contango
CONTANGO WATCH: The shape of the cocoa forward curve was little changed from last week. Backwardation characterizes the very front end, with contango thereafter.
ROLL COSTS: Investors net 16.33 percent from rolling front-month cocoa contracts, up from 14.97 percent last week.
BOTTOM LINE: Backwardation to Contango
CONTANGO WATCH: The sugar forward curve flattened notably last week, though it continues to exhibit steep backwardation.
ROLL COSTS: Investors net a still-attractive 44.81 percent positive roll yield from holding sugar contracts, down from 55.89 percent a week ago.
BOTTOM LINE: Steep Backwardation
CONTANGO WATCH: The shape of the cotton forward curve was little changed from last week as prices plunged.
ROLL COSTS: The cotton annualized roll yield increased to an extremely attractive 77.26 percent.
BOTTOM LINE: Steep Backwardation
