The rapid rise in commodity prices in the second quarter made no sense whatsoever from an honest supply or demand perspective. Speculators jumped on the opportunity to profit in the commodities market just as they would any stock that was rising or dropping in value. 

Unlike long-term investors, of course, speculators exit the ride when the trip is over. And for now, they've left the commodity patch—at least for awhile.

As of early Wednesday, oil was trading around $116 a barrel. That was down from $147 near the end of last quarter. And after corn had gotten up to close to $8 per bushel, it's now trading at about $5.65 a bushel.

A handy way to measure oil's rise and fall is to check the U.S. Oil Fund (AMEX: USO). The exchange-traded fund's share price hit $118 in the first week of July before falling to $92.74 on Tuesday.

If you were long oil, you've been spanked in the past five weeks. The same holds true for any of the commodities ETFs and exchange-traded notes. For example, the Market Vectors Steel ETF (AMEX: SLX) peaked at $114 a share in May. Today, it's trading around $78, representing more than a 30% drop.

A way to play agriculture is through the PowerShares DB Agriculture (AMEX: DBA). The exchange-traded fund was trading at $26 per share in August 2007. By this February, it was up to $41 per share; now it's around $35 a share. The ETF owns not only corn but wheat, soybeans and sugar.

Demand Vs. Speculation

If you're a long-term investor, you should understand that commodities markets of all types are going to see a lot of fluctuations in pricing over time. Given the nature of this beast, it's important to focus on real long-term demand characteristics of these markets. Try to separate those from more short-term speculation that tends to creep into global commodities pricing.

My suggestion would be to pause and prepare a shopping list and wait for at least Christmas or Thanksgiving. In the third quarter, you often have events come together in a perfect storm. A lot of the professional traders are on vacation or take a break from watching markets every day. Often in this quarter, stock market leaders earlier in the year pause and catch their breath.

We've already seen that play out in natural gas, steel and international exchange-traded funds. But it might take longer for this market to shake out. Trying to time when all of its moving parts will create a perfect storm in the short term is a fool's game.

We know that speculation has driven much of the run in commodities. Whether those prices settle for a month or a year is relative—what we're trying to add to our shopping list are the ETFs that add true value and are driven by real demand as measured by long-term demographic trends.

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