Interview with Ashmead Pringle Part I

Ashmead Pringle is the President and Founder of GreenHaven Commodity Services, an Atlanta-based firm that recently launched its first exchange-traded fund on the American Stock Exchange. That fund, tied to an old version of the CRB Index, offers equal-weighted exposure to the commodities market.

Pringle spoke with HAI anchor Mike Norman about the new fund and why all investors should be targeting commodities.

Mike Norman, anchor, HardAssetsInvestor.com (Norman): Welcome, everybody to HardAssetsInvestor’s continuing interview series.

This is Mike Norman, the economic contrarian and anchor for HAI. I’m pleased to be here today with Ashmead Pringle, who is the president and founder of GreenHaven Commodity Services. He’s going to talk about a new commodity ETF that was just launched. Ashmead, thank you very much for coming on the show; I appreciate it.

Ashmead Pringle, president and founder, GreenHaven Commodity Services (Pringle): Mike, it’s my honor, and it’s an honor to be here at the American Stock Exchange, where we launched our fund today: the GreenHaven Continuous Index Fund, or GCC for short.

GCC is going to track a broad index of 17 commodity futures. We have grains: corn, wheat and soybeans; livestock in cattle and hogs; the softs of coffee, sugar, cotton and orange juice; gold, silver, platinum and copper; and some energy in crude oil, heating oil and natural gas. Each is equally weighted because that’s the way the underlying index, the Reuters CCI Continuous Commodity Index [CCI], works.

We’ll actually track the total return index, which includes the CCI plus a T-bill yield. Because each of these 17 commodities is equally weighted, that gives us a fairly balanced sector weighting that’s lacking in a lot of commodity ETFs. We’re not so heavily energy-weighted as some other ones.

Norman:You’re not. Why was that?

Pringle:Well, just because of the way this particular index is structured. The CCI really dates back to the late-1950s, when the Commodity Research Bureau developed an index which they then called the CRB. It was then an index of futures and spot contracts. It went through a number of revisions, the ninth being in 1995 which left it in its current form of 17 equally weighted commodities. In 2005, a new commodity index was created by Reuters and Jefferies that was a little bit different, which is now called the CRB Reuters; and the CCI―what was the old CRB―is now the CCI. So that’s the index we track: the last revision of the CRB, from 1995, with 17 equal commodities.

Norman:You’re certainly somebody who is not new to commodities. You spent most of your career, if not all of your career, in the physical commodity business.

Pringle: Pretty much, Mike. My grandfather and father were both in the fertilizer business, and so was I. In my 35-year career, I’ve been in timber, fertilizer, grain and energy, so it’s nice to be in commodities now that they’re stylish again.

Norman:I spent many years myself as a member of many different commodity exchanges, and what I see right now has really just been incredible. What do you make of this commodity boom that is going on? Is this something where it basically reflects the emergence of these new countries, these economic powers like China and India, which are developing and demanding more raw materials? Is it a one-time price adjustment or are we, as some people say, in a secular bull market in these commodities prices?

Pringle:Well, I think all those things are true, Mike. We preached for a while starting a few years ago that we’re on the verge of a secular rise in the grains, much like 1973 and 1974, when grain prices doubled and tripled and stayed up, basically.

We don’t think this is a spike really, in any of the markets. In other words, a spike implies that we’re coming back down. I don’t believe we’re coming back down. We may rest a bit, but we think prices in general have moved to higher plateaus.

Certainly China and India wanting more of everything is part of the story, with the industrials and food. Another part of the story is a weak dollar; a weak dollar really is supporting all global commodities. We feel that energy costs really cannot go down. It’s difficult to be bearish on crude―even if you’re not bullish―from a production point of view. In the ags and the grains, we think production increases are limited, stocks are low and resources are scarce in terms of water. Seventy percent of the world’s fresh water goes to agriculture; it takes 1,000 tons of water to make a ton of grain and 18 tons to make a ton of steel. So the countries that are industrializing are likely to use their resources for industry and import their grain. The U.S. is going to be able, I think, to sell all they can grow for some period of time.

Norman:A very bullish picture indeed, and one of the reasons why investors should be looking at exposure to commodities.

Be sure to check Part II of our interview with Ashmead Pringle.