We’ve made no secret that we think Commodity ETFs are a poor choice for investors (see Commodity ETFs Suck – 2012 Edition), and the underperformance of those ETFs compared to futures contracts in 2011 and 2012 bore that out. But so far, 2013 has not matched our expectations, with commodity ETFs ahead of the Dec futures performance through the end of April.

This month the ETF advantage shrank a bit for crude oil and corn, but expanded for natural gas. UNG has had a great year, returning more than 24% since the beginning of the year (Disclaimer: past performance is not necessarily indicative of future results). But that’s just one year since it was declared the worst ETF investment of all time after it had lost more than 96% since inception. The ETF is now outperforming the rallying market it aims to track, leaving us to admit that even a blind squirrel finds the nut sometimes.

Do we think the commodity ETFs will continue to outperform a simple strategy of buying and rolling the December contract annually?  No.  Maybe they outperform for a month, a quarter, or even a year at some point (and this could very well be one of those years). But they will still be rolling their positions many times more than a single annual roll, creating a drag in the form of cost and the roll yield.

Stay tuned.

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