How Do Commodities Perform In November?

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Includes: ADZ, AGA, AGQ, AGU, CORN, DBA, DDG, DE, FCX, GASL, GASX, GLD, MON, MOS, SLV, UNG, WEAT
by: David Ristau

Have you been wondering how commodities will fare in November?

A lot of that will depend on the dollar movement. It appears that the dollar may be ready to weaken further on euro bailout plans for November, and that may give the dollar some ceiling. Historically, November has been good for some commodities and bad for others.

Here is how select commodities performed in the past 25 Novembers (since 1986).

Click to enlarge

Unknown ObjectThe most consistent commodity during November is corn, seeing gains 62.5% of the time for average gains of 4.19%. Corn is closely followed by gold, which has seen gains 60% of the time for 3.26% gains over this period. Wheat has also performed well, moving up 14/25 times with a max drawdown of just over 7%.

With that information, we like looking at some of the agricultural ETFs and stocks for plays. Some of the best ways to get involved in agriculture is the PowerShares DB Agricutlure (NYSEARCA:DBA) and Teucrium Corn (NYSEARCA:CORN). We like selling bull put spreads on weakness in both of these ETFs for November expiration. Additionally, we like looking at all of the agricultural stocks: Mosaic (NYSE:MOS), Monsanto (NYSE:MON), Agrium (NYSE:AGU) and Deere (NYSE:DE). Deere is probably our favorite as it still is a long way from earnings in late November and has broken some key levels as of late. A good month for agriculture is good for DE, and the stock has performed well in past Novembers.

The worst commodities have been silver and natural gas, seeing hefty losses 48% and 50% of the time, respectively. Average losses for silver and natural gas come in at 3.55% and 6.87%, respectively.

To play silver, we like looking at iShares Silver (NYSEARCA:SLV). For natural gas, we like to use United States Natural Gas (NYSEARCA:UNG). UNG probably is the weakest looking commodity play in the group as the commodity has not joined the October rally of the rest, and it seems to be in a strong downward price channel.

We like bear call spreads on natural gas for the month of November with the 9/10 strikes. Shorting UNG is not a poor choice as well.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DE over the next 72 hours.