Investors Head for Exit as Commodities Extend Slump – by Luzi Ann Javier (Bloomberg News – September 30, 2014)

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Investors are betting that the worst isn’t over for commodity prices that already are the lowest in five years.

About $907 million was pulled from U.S. exchange-traded products backed by raw materials this month, the most since April, data compiled by Bloomberg show. Expanding surpluses, a surging dollar and slowing growth in China helped send the Bloomberg Commodity Index to the lowest since 2009, reversing first-half gains fueled by a polar vortex and dead pigs in the U.S., and escalating tensions in Ukraine and the Middle East.

Banks from Societe Generale SA to Citigroup Inc. expect the losses for many raw material to continue. U.S. farmers are collecting the biggest corn and soybean crops ever, and global stockpiles of nickel are at an all-time high. Americans are producing the most oil since 1986, compounding a global surplus. China, the largest consumer of grains, energy and metals, is poised for its slowest expansion in two decades.

“The commodity complex as a whole did really well for a long time, and as a result, a lot of money poured in across the board and created oversupply and over-capacity,” said Peter Sorrentino, a Cincinnati-based fund manager who helps oversee $1.8 billion at Huntington Asset Advisors Inc. “It definitely has been an asset class that people have been withdrawing money from. Hedge funds congregate in momentum trades, and over the last two years, commodities have been sources of cash.”

Not ‘Super’

The Bloomberg Commodity Index fell on Sept. 22 to the lowest since July 2009 and is down 5.6 percent this year, set for a fourth straight annual loss, the longest slide since the data begins in 1991. The declines come after the index more than doubled from 2000 to a record in July 2008. By 2012, Citigroup declared the end of the commodity “super cycle,” a period of longer-than-average rising prices. Goldman Sachs Group Inc. also said the super cycle was over last year.

The banks are getting more bearish. Societe Generale on Sept. 12 lowered its price forecasts for more than half of the 43 raw materials it tracks, and on Sept. 24, Citigroup pared its outlook on commodities including crude oil, gold, corn and wheat. Goldman Sachs is sticking with its outlook for losses in copper and gold. Abundant supplies helped push 14 of 22 raw materials on the commodity index lower this year.

Related: A Rising Star Commodity ETF Bucks the Big Outflows

The Bloomberg Commodity Index is down 12 percent since June 30, headed for the biggest quarterly decline since 2008, while MSCI All-Country World Index of equities slid 2.8 percent. The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major peers, has jumped 6.7 percent, the most since 2008.

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