Flirting with Models Benjamin Hoff – Commodity Futures Surfaces and the Cash-and-Carry Glue (S7E17)
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Jun 30, 2025 Benjamin Hoff, Global Head of Commodity Strategy and Research at Société Générale, shares his insights from his transition from rates to commodities. He discusses the unique cash-and-carry economics that differentiate commodities and delves into the complexities of commodity risk premiums. Hoff also introduces innovative metrics like the Lévy area to enhance trading strategies. The conversation highlights the interplay of market dynamics, seasonality, and the importance of specific trading signals, making it a compelling listen for anyone interested in commodities.
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Commodities vs Rates Curve Dynamics
- Commodities and rates both rely on curve term structure, but different fundamentals drive their term structures.
- Commodity curves are influenced by inventory, supply-demand, and geopolitics, unlike rates which follow macro factors like central bank policy.
Cash and Carry Tethers Prices
- Cash and carry economics and physical storage capacity tightly tether spot and futures prices in commodities.
- When credit or storage fails, commodity curves can snap and decouple, revealing market fragility.
Sparse Fundamental News in Commodities
- Commodity markets have sparse fundamental news compared to rates or equities.
- Price acts as the equilibrator, making technical signals more relevant during fundamental information droughts.