Strength in commodity benchmarks is getting harder for equity investors to capture. A sea change in global markets has agricultural sectors driving the broad resource indices higher while silver and energy prices languish.
The chart below plots the performance of three-month futures contracts for all 17 commodity prices represented in the widely followed New York Board of Trade Continuous Commodity (CCI) Index.
The CCI index is higher by 11.5 per cent in 2014, although most investors aren't feeling the benefits in their portfolios. Year-to-date performance is led by coffee futures, which have climbed 78 per cent due to drought conditions in Brazil.
SOURCE: Scott Barlow/Bloomberg
Seven of the top nine commodity subsectors are agricultural products. And unlike copper and energy prices, higher agricultural costs are more likely to harm Canadian portfolio performance.
Spending more at the grocery store limits consumption growth in other areas, and limits sales growth in much of the economy. In Canada, a weaker currency exacerbates the higher costs on imported foods.
Rising agricultural prices will also crimp profits for a number of specific companies. Starbucks Corp., for instance, will pay more for coffee and likely won't be able to pass the full effects on to consumers. Hog and cattle prices will cause similar issues for Maple Leaf Foods Inc.
A previous version of this article included Tim Horton's Inc. among the companies potentially affected by recent commodity price changes. A Tim Horton's spokesman said that, due to their franchise model, commodity costs do not impact the company's profitability.