What Is the Commodity Research Bureau Index (CRBI)?
The Commodity Research Bureau Index (CRBI) acts as a representative indicator of today's global commodity markets. It measures the aggregated price direction of various commodity sectors.
This commodity index comprises a basket of 19 commodities, with 39% allocated to energy contracts, 41% to agriculture, 7% to precious metals, and 13% to industrial metals. The CRB is designed to isolate and reveal the directional movement of prices in overall commodity trades.
- The Commodity Research Bureau Index (CRB) acts as a representative indicator of today's global commodity markets.
- The CRBI measures the aggregated price direction of various commodity sectors, and is designed to isolate and reveal the directional movement of prices in overall commodity trades.
- In 1986, the CRBI became the most-watched contract on the exchange; today, several brokers still support commodity indices that track commodity price movements.
Understanding the Commodity Research Bureau Index (CRBI)
After the Great Depression in the 1930s, trading activity in stocks, bonds, and commodity futures was beginning to show some life. However, traders and those interested in commodities found that very few sources of comprehensive information were available to them.
With that in mind, a journalist named Milton Jiler founded the Commodity Research Bureau, with the Futures Market Service as its first publication, according to the CRB website. He felt traders needed something that better reflected the overall price activity in the commodity markets. To solve this problem and improve trade transparency, the CRB Index was designed to provide a dynamic representation of broad trends in commodity prices.
In 1986, the New York Futures Exchange (NYFE) introduced the CRB Futures Price Index, which quickly became the most-watched contract on the exchange. Today, several different brokers support commodity indices that track baskets of commodities to reflect price movements. Investors recognize them as a significant barometer of commodity prices and market access. For example, The Thomson Reuters Equal Weight Commodity Index is the CRB Index in its original equal weight from 1957.
Other Commodity Indices
The CBR is one of the original commodity index providers. Since its inception, many other providers have followed.
For example, today there is the Dow Jones Commodity Index, Bloomberg Commodity Index (BCOM), UBS Bloomberg CMCI, Reuters/Jefferies CRB, Rogers International, and the S&P Goldman Sachs Commodity Index (GSCI).
All of these indices are designed to provide liquid and diverse exposure to actual commodities through futures contracts.
Commodities as an Asset Class
The three main asset classes are traditionally equities, or stocks; fixed income, or bonds; and cash equivalents, or money market instruments. More recently investment professionals have added commodities to the asset class mix. Some investment professionals feel they are beneficial to an investor's portfolio because they add diversification, inflation protection, and absolute returns.
Other asset managers think commodities are a niche asset class that are subject to high price volatility. Regarding strategies, passive long-only indexes represent the highest exposure, according to a study by the CFA Institute. To this end, commodity indices such as the CRB are an invaluable tool to portfolio managers.
What Commodities Does the CRB Index Track?
The CRB index tracks a basket of 19 commodities. These include (in alphabetical order): Aluminum; Cocoa; Coffee; Copper; Corn; Cotton; Crude Oil; Gold; Heating Oil; Lean Hogs; Live Cattle; Natural Gas; Nickel; Orange Juice; RBOB Gasoline; Silver; Soybeans; Sugar; and Wheat.
How Are the Commodities in the CRB Index Weighted?
The CRB index is weighted to Energy: 39%; Agriculture: 41%; Precious Metals: 7%; and Base/Industrial Metals: 13%.
Who Publishes the CRB Index?
The Commodity Research Bureau (CRB) Index is currently published by Thomson Reuters.