Salient to Investors:

The S&P GSCI Spot Index has lagged the MSCI All-Country World Index for 6 months, the longest stretch since 1998.

Hedge funds cut combined bullish bets across 18 US raw-material futures by 51 percent from a 16-month high in September and are bearish on 6 of them.

EPFR Global said investors withdrew a record $23.3 billion from commodity funds in 2013 while  global equities attracted $182 billion. Gluts are emerging.

The IMF predicts global growth of 3.3 percent in 2013 versus 3.2 percent in 2012, and China to grow 7.75 percent in 2013 and 8.2 percent in 2014.

Goldman Sachs and Citigroup predict the end of the commodities bull market even as the global economy expands.

Goldman predicted in May that commodities will return 1.6 percent in a year as losses in agriculture and precious metals diminish gains from energy and industrial metals. Jeffrey Currie at Goldman said commodities are diverging from equities as the supercycle is eclipsed by the supply surge, and predicted the agricultural segment of the S&P GSCI will drop 13 percent in 12 months as livestock and precious metals lose 4 percent and energy and industrial metals will advance 5 percent. Goldman predicts corn decline another 3.2 percent in 6 months and wheat another 11 percent.

Ed Morse at Citigroup said most commodities will drop in 2013 as China’s economy moves focus from infrastructure to domestic consumption and services, and advises investors to pay more attention to supply and demand than just broad economic trends. Citigroup expects WTI crude oil to average $90 in 2013 versus $94.15 in 2012. US inventories are the highest since 1931, and the proportion the US supplies for its own energy needs is the highest since 1986.

John Stephenson at First Asset Investment Mgmt is avoiding commodities as a lot of inventory and visible supply always pressures prices, and the real driver of demand, China, is weak.

Barclays estimates China will use 5.2 percent more copper this year versus 6.8 percent more in 2012. China will consume more than 1 in every 5 tons of global corn supply in 2015 as its hog herd reaches 447 million animals, 6 times the US.

US builders use 400 pounds of copper in a single-family home.

Alan Gayle at RidgeWorth Capital Mgmt said the outlook for commodities will turn bullish when demand starts moving higher over the next few months.

Morgan Stanley predicts copper production to outpace demand for the first time in 4 years in 2013, and Goldman predicts prices will decline 6 percent in 12 months.

Adrian Day at Adrian Day Asset Mgmt said the combination of higher production and slower growth in China means the potential surplus of production over demand for the rest of 2013 will produce lower prices.

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