Benchmarking results against a standard of measure of performance is an essential part of good investment practice. This is as true for commodities as it is for equities, bonds or hedge funds.
Everyone wants a benchmark that emulates equity indexes where we talk about alpha and beta and use the index benchmark to separate market-induced returns from those generated by the brilliance (or lack of brilliance) of the portfolio manager. The difficulty is that commodities—either cash or futures—aren't equities and what works with equities doesn't necessarily fit with commodities.
Stocks, Bonds And Commodities
Equities and bonds are capital assets. They are not consumed and are long lived. Their prices are based on the future income they generate. Commodities are different. Cash market commodities—physicals—are largely consumables. The value of a barrel of oil depends on the consumption value of products made from it: gasoline, jet fuel, plastics or anything else that can be extracted from hydrocarbons. The value of grains—corn, soybeans or wheat—is based on the value of consumables derived from the grains. These aren't long-lived assets; rather, they are consumed, and their value is based on how much someone will pay for the consumption.
One cash market consumable that is often seen as an asset is gold. While there are consumption uses of gold ranging from jewelry to dentistry, most people or organizations that hold gold perceive it as an asset. Moreover, speculative movements in gold prices are much larger than changes in its consumption value. Gold's price rises if more people believe the price will rise and the price drops if more people believe the price will drop. Central banks—some of the more fabled gold owners—hold gold out of concern that their holdings of foreign currency may fall in value. Gold may be perceived as an asset and it may—as has been true in recent years—be a successful speculation, but it doesn't generate income the way a stock does.
Commodity futures contracts aren't long-lived assets either. A futures contract is an agreement to purchase or sell, on a specific future date at a price agreed on today, a particular amount of a commodity. It can be thought of as an insurance policy, a gamble or a bet: an insurance policy if it assures a farmer he will get a specified value for his crop even if the market collapses; a gamble when the speculator offers the insurance; and a bet because the value of the contract depends on how the market turns out. No matter what the contract is, it isn't a capital asset where the price depends on future income it generates.
Futures contracts are traded, and the trading determines the prices, gains or losses. Trading doesn't mean the futures contract is a capital asset. Part of the return to holding a futures contract is the return on the collateral posted with a clearinghouse or exchange. The collateral is usually a Treasury bill or bond, and the return derived from the collateral is the return from the Treasury, not the futures contract. One example is two identical contracts, one long and one short, with the same collateral. By definition, the return on one position will be the opposite of the other except for the collateral.