The Handbook of Commodity Investing

CHAPTER 30

An Overview of Commodity Sectors

Roland Eller

Managing Director

Roland Eller Consulting GmbH

Christian Sagerer

Structured Products Sales Manager

JPMorgan Chase Bank

The late 1980s through early 1990s were huge years for equities and favorable interest rates. Since then, the commodities asset class has taken a backseat as an investment class.

As shown in Exhibit 30.1, commodities can basically be categorized in two ways: hard and soft. Hard commodities can further be subdivided into energy and metals, while soft commodities are based on three subsegments: comestible goods, industrial agrarian goods, and animal products. In the energy subcategory, we can differentiate between fossil and alternative substrates. In the metal subcategory, we can differentiate between precious, industrial, and ferrous metals. Within the soft commodities, only the subsegment “comestible goods” can be further broken down among corn, oils, and consumer products.

HARD COMMODITIES: ENERGY

Energy includes fossil and alternative energy. We describe both in this section.

EXHIBIT 30.1 Classification of Asset Class Commodities

Source: Authors.

Fossil Energies

The energy supply has always been of primary importance to mankind. Energy is the solution to our most basic needs: It provides light, protection against cold or heat, and makes modern technology and transportation possible. But due to the limitations ...