OptionMetrics flags hidden gems in commodities as wheat, soybeans outshine copper

As of Oct. 16, 2026, sugar was up 44.7% year to date, Chicago SRW wheat 32.3%, and soybeans 22.1%; all three posted higher Sharpe ratios than copper. Wheat and soybeans had a record 0.919 price correlation, while copper returned 15.5% with a 0.65 Sharpe ratio and average implied volatility of 29.1%, above its 21-year baseline of 26.9%. OptionMetrics contributor Brett Friedman said copper’s performance disappointed traders treating it as an AI proxy.

Analysis

The actionable signal is portfolio construction, not a simple ranking of commodities. A 0.919 wheat/soybean correlation makes holding both a concentrated crop-weather and supply-shock bet, not meaningful diversification; adding both may also amplify exposure to the same macro and positioning unwind. Sugar may diversify that exposure, but its exceptionally strong run raises entry risk: backward-looking Sharpe ratios do not establish that the risk/reward remains attractive at today’s prices.

Index inclusion can create indirect demand through commodity benchmarks, but weights, roll schedules and rebalancing determine whether that flow is material. Spot performance is also not an investor’s realized futures return: verify curve shape and roll yield before translating price gains into an investable thesis. Copper’s weaker risk-adjusted result challenges the near-term AI-proxy trade, but does not disprove longer-horizon electrification demand; treating one year’s returns as a structural verdict risks selling the wrong horizon.

Near term, crop-weather updates, harvest/export data and positioning could drive sharp reversals; over 1–3 months, seasonal volatility and futures curves matter more than the narrative. Over 6–18 months, supply response and index-flow persistence determine whether crop strength is durable. The bullish crop view is falsified by deteriorating balances or a sustained break in price momentum; the bearish copper view is falsified by improving physical-market indicators and a sustained relative-performance turn. Verify current positioning, contract curves and crop balance sheets before sizing.

Key Decisions for Investors

• Do not treat wheat and soybeans as separate diversifiers: cap their combined risk budget or use one as the crop exposure. Reassess if their rolling correlation falls materially and stays lower.
• Avoid chasing sugar outright after the large run without confirming supply balances, speculative positioning and curve/roll yield. If those checks remain supportive, consider a limited-risk futures position; otherwise wait for a pullback or consolidation.
• No immediate copper short solely on its weaker risk-adjusted performance. Keep the AI/electrification thesis on watch and require physical-market confirmation before adding; a sustained relative-strength turn would invalidate the underperformance signal.
• Before any commodity-index allocation, check benchmark weights and roll methodology. A broad index may deliver very different crop exposure and returns from the underlying spot-price narrative.