As commodity prices crash below levels last seen at the nadir of the financial crisis its worth asking when, or indeed if, the cycle will turn and commodity prices will bottom out.
From an investors point of view commodity futures returns (which include the spot price and the risk premium from taking on hedging risk) are linked to the state of inventories in the economy. And so commodity returns can therefore be expected to be a lagging indicator of recession.
During the late-expansion period (anticipating a recession), low inventory levels imply that commodity futures experience higher-than-normal returns. Further, because of inertia in inventories, it is not until a recession sets in that commodities experience low returns (i.e. where we are now). Coming out of a recession, commodities futures returns have tended to improve only after the early expansion period has begun.