5 Commodity ETFs Enjoying Hot Streak in Q1

Commodities continued their hot streak this year, wrapping up their best quarter in more than 30 years. Inflationary pressures along with the tensions between Moscow and Western countries over Ukraine have powered the rally in a wide range of commodities.

While most commodity ETFs have been soaring, iPath Series B Bloomberg Nickel Subindex Total Return ETN JJN, United States Natural Gas Fund UNG, United States Brent Oil Fund BNO, iPath S&P GSCI Total Return Index ETN GSP and Teucrium Wheat Fund WEAT have been the show stealers (read: Top and Flop ETFs of Q1).

Solid Commodity Trends

Western countries like the United States, Europe, the United Kingdom, Canada, Australia and Japan have slapped a slew of sanctions and restrictions on Russia in lieu of the attack on Ukraine. These have led to supply disruption in an already-tight commodity market, resulting in shortages of food and energy. Inflation has been flaring up further due to higher energy and food prices.

Both Russia and Ukraine are among the world’s biggest producers of commodities, especially oil, gas, and metals, both base metals and specialty metals. U.S. crude oil prices have risen 43% so far this year and hit a level not seen since 2008 in early March. Gold and palladium logged their biggest quarterly gain since September 2020 while platinum registered its biggest quarterly gain since March 2021. Meanwhile, zinc reached its highest since 2007, aluminum surged to an all-time high and nickel raced to an 11-year peak in March.

Coming to agricultural products, wheat hit the highest level since 2010, gaining 33% this year while corn jumped 24%. Together, Russia and Ukraine account for one-third of the global wheat export market and Ukraine is the fourth-largest single-nation producer of corn.

Further, the commodity futures market is in the state of backwardation, where later-dated contracts are cheaper than near-term contracts, which has erased worries about roll costs and supported the rally. This signals that the commodity market is tightening and demand is robust, paving the way for a rally. This trend is likely to persist, at least in the near term, acting as the biggest catalyst for the commodities.

We have profiled the ETFs below:

iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN) – Up 66.2%

iPath Series B Bloomberg Nickel Subindex Total Return ETN follows the Bloomberg Nickel Subindex Total Return, which delivers returns through an unleveraged investment in the futures contracts on nickel (read: 5 ETFs Leading the Commodity Rally in March).

The note has been able to manage $66 million in AUM and trades in a paltry volume of roughly 106,000 shares per day. It has an expense ratio is 0.45% and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

United States Natural Gas Fund (UNG) – Up 59.5%

United States Natural Gas Fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire.

United States Natural Gas Fund has AUM of $385.1 million and trades in volume of around 8 million shares per day. The fund has 1.35% in expense ratio.

United States Brent Oil Fund (BNO) – Up 42.5%

United States Brent Oil Fund provides direct exposure to the spot price of Brent crude oil on a daily basis through futures contracts.

United States Brent Oil Fund has amassed $300.1 million in its asset base and charges 1.13% in annual fees and expenses. Volume is good as it exchanges 3.4 million shares a day on average.

iPath S&P GSCI Total Return Index ETN (GSP) – Up 38.4%

iPath S&P GSCI Total Return Index ETN provides exposure to the S&P GSCI Total Return Index. The benchmark delivers returns through an unleveraged investment in the contracts comprising the Index plus the Treasury Bill rate of interest that could be earned on funds committed to the trading of the underlying contracts.

iPath S&P GSCI Total Return Index ETN has gathered $47 million in its asset base while charging 70 bps in annual fees. The note trades in a moderate volume of 40,000 shares per day (read: More Rally for Commodity ETFs in the Cards?).

Teucrium Wheat Fund (WEAT) – Up 31.1%

Teucrium Wheat Fund provides investors an easy way to gain exposure to the price of wheat futures in a brokerage account. It uses three futures contracts for wheat, all of which are traded on the CBOT Futures Exchange. The three contracts include the second-to-expire contract, weighted 35%; the third-to-expire contract, weighted 30%; and the contract expiring in December following the expiration month of the third-to-expire contract, weighted 35%.

Teucrium Wheat Fund has amassed $502.3 million in its asset base and trades in a good volume of about 4.4 million shares a day. It charges a fee of 1.14% per year and has a Zacks ETF Rank #3 with a High risk outlook.

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United States Brent Oil ETF (BNO): ETF Research Reports
 
Teucrium Wheat ETF (WEAT): ETF Research Reports
 
iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN): ETF Research Reports
 
iPath S&P GSCI Total Return Index ETN (GSP): ETF Research Reports
 
United States Natural Gas ETF (UNG): ETF Research Reports
 
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