January is finished, which means we have a new month of data in our regular series examining long-only commodity ETFs, and comparing their performance to the December-dated futures contracts. You’ll notice that this time around, two of the ETFs seem to have the advantage. What’s going on? Well, this is something we’ve run into before, and there are a couple of factors at work.

Much of the ETF underperformance we observe is generated by one glaring inefficiency – they have to roll their front-dated futures contracts repeatedly throughout the year. At the beginning of the year, before the ETFs have had to start rolling their contracts, it’s possible for them to start out slightly ahead. The second factor (which we also saw last year) is when near-term concerns, such as expectations of tighter supply, cause a price increase in short-dated months, but have a minor effect on longer-dated months. In either case, we expect that the futures contracts will eventually overtake the ETFs – and we’ve been proven right twice before.

The commodity ETFs may be sitting pretty right now, but they should enjoy it while it lasts. We doubt they’ll be celebrating for long.

Disclaimer: past performance is not necessarily indicative of future results.