The return of commodities

Commodity prices were volatile in the first half of 2009, but in the second half companies gained confidence to start hedging again, making banks optimistic about 2010.

Commodity prices had a rough ride in 2009. The Dow Jones-UBS Commodities Index, a measure of global commodities prices, dropped to $99.30 in July 2009 from an all-time high of $238.20 in July 2008. The index was at $130.30 in December 2009, up approximately 15% year-to-date.

"Trading companies do need price volatility," said Willem Klaassens, global head of commodity traders and agribusiness at Standard Chartered Bank. "If there is a flat price they can't trade and they can't make money. Too extreme volatility however, ...