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 - CRB® Indexes |
| CRB® Spot Indexes |
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| Continuous Commodity Index (CCI) and Reuters-CRB® Indexes |
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| Reuters/Jefferies-CRB® Indexes |
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 For nearly 50 years, this world-renowned index has served as the most widely recognized measure of global commodities markets. As a benchmark, the Reuters/Jefferies-CRB Index is designed to provide timely and accurate representation of a long-only, broadly diversified investment in commodities through a transparent and disciplined calculation methodology.
The history of the Reuters/Jefferies-CRB Index dates back to 1957, when the Commodity Research Bureau constructed an index comprised of 28 commodities that made its inaugural appearance in the 1958 CRB Commodity Year Book.
Since then, as commodity markets have evolved, the Index has undergone periodic updates to remain a leading benchmark for the performance of commodities as an asset class.
The Index was renamed the Reuters/Jefferies-CRB Index in 2005 when it underwent its tenth and most recent revision - as the collaborative effort of Reuters, the global information company, and Jefferies Financial Products, LLC - to maintain its continued accurate representation of modern commodity markets.
For more information on the Reuters/Jefferies-CRB Index visit Jefferies.com.
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| Reuters/Jefferies-CRB® Total Return Index |
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| - 2006 - The Commodity Price Trend |
The Reuters/Jefferies CRB Index in 2005 closed the year up +16.9%, which was the fourth consecutive positive annual close (2004 +11.2%, 2003 +8.9%, 2002 +23.0%). In the previous recessionary year of 2001, the RJ/CRB Index fell -16.3%.
Five of the six Reuters-CRB Sub-indices posted gains in 2005: Energy (+54.3%), Industrials (+30.3%), Softs (+22.4%), Precious Metals (+20.5%), and Grains (+9.5%). The Livestock (-1.1%) was the only sector to close lower in 2005. These Reuters-CRB sub-indices are based on the old Reuters-CRB Continuous Commodity Index (CCI), which was replaced by the new Reuters/Jefferies Index midway through 2005.
The RJ/CRB Index was driven higher in 2005 by strong physical demand in most commodity markets, concerns about inflation due to higher energy prices, and an influx of investment cash into commodity index funds by individual and institutional investors looking for an inflation hedge, strong returns, and portfolio diversification. The dollar index rallied by +12.6% in 2005 and was a bearish factor for commodity prices, unlike 2002-2004 when the 30% plunge in the dollar was the main driver behind higher commodity prices. The US and China were the main engines of world economic growth in 2005 with US GDP growth remaining firm at +3.5% and Chinese GDP growth in 2005 continuing at the torrid pace of +10.1%.
Energy
The Reuters-CRB Energy Sub-index, which is comprised of Crude Oil, Heating Oil, and Natural Gas, accounts for 18% of the overall CRB Index. The Energy Sub-index in 2005 closed +54.4%, showing double-digit gains for the fourth consecutive year (2004 +27.5%, 2003 +11.9%, 2002 +56.5%). Petroleum product futures prices (nearest future) showed sharp gains of the year with crude oil up +40.5%, gasoline +57.1%, and heating oil up +40.5%. However, natural gas also rallied sharply by +82.6% on the year after the slight loss of -0.6% seen in 2004. Energy prices were driven higher in 2005 mainly by strong demand and concerns that production will not be able to keep up with demand. Hurricane Katrina on August 29, 2005 caused massive damage and oil rig production shutdowns in the Gulf of Mexico, but petroleum prices fell after the hurricane because of a small drop in US demand and a sharp pickup in overseas imports.
Grains
The Reuters-CRB Grains and Oilseeds Sub-index, which is comprised of Corn, Soybeans, and Wheat, accounts for 18% of the overall Index. The Grains and Oilseeds Sub-index in 2005 closed +9.5% yr/yr, recovering about one-half of the sharp -21.6% decline seen in 2004. The soybean and corn crops in 2005 turned in another bumper year performance despite a drought in some areas of the corn and soybean belt such as Illinois. US carry-over of inventories rose sharply in 2005-06 (+15% for corn, +98% for soybeans), as demand failed to keep pace with the bumper crops.
Industrials
The Reuters-CRB Industrials Sub-index, which is comprised of Copper and Cotton, accounts for 12% of the overall Index. The Industrials Sub-index showed a +30.3% gain in 2005, which more than reversed the -9.6% loss seen in 2004. Copper soared by 45% in 2005 (adding to the +43% gain seen in 2004 and the 50% gain seen in 2003), driven higher by very strong demand from the US and particularly China, combined with lagging mining output. Cotton gained +21% in 2005, despite a record 2005-06 US cotton crop, because of strong global demand for cotton.
Livestock
The Reuters-CRB Livestock Sub-index, which is comprised of Live Cattle and Lean Hogs, accounts for 12% of the overall Index. The Livestock Sub-index closed -1.1% in 2005, falling back after the sharp +27.7% rally seen in 2004. Live cattle futures prices (nearest future) rallied +9.7% in 2005, adding to the +19.4% gain seen in 2004, as demand remained strong and cattle numbers in the US remained weak. Lean hog prices fell -14.6% on the year due to weaker demand, high slaughter rates, and price competition from chicken stemming from bird flu and weaker US chicken export demand.
Precious Metals
The Reuters-CRB Precious Metals Sub-index, which is comprised of Gold, Platinum, and Silver, accounts for 17% of the overall Index. The Precious Metals Sub-index rallied by +20.5% in 2005, which is the fourth consecutive year of strong gains (2004 +8.9%, 2003 +25.9%, and 2002 +17.1%). Bullish factors centered on lagging mining output and strong investment and jewelry demand.
Softs
The Reuters-CRB Softs Sub-index, which is comprised of Cocoa, Coffee, Orange Juice, and Sugar #11, accounts for 23% of the overall Index. The Softs Sub-index in 2005 closed +22.4%, adding to the sharp +37.2% gain seen in 2004. The sector gains were driven primarily by sugar (+62.4%) and orange juice (+45.4%). Sugar prices were driven sharply higher by the inability of production to keep up with strong global demand, which was boosted even farther in 2005 by rising ethanol production. Orange juice prices were boosted by the second straight year of severe orange crop damage from hurricanes in Florida. Coffee (+3.2%) and cocoa (-2.8%) closed mixed in 2005.
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(Updated May 09, 2008)
