This blog post originally appeared on RealMoney Silver on June 4 at 7:29 a.m. EDT.

"The collapse in the commodity index is telling us that the peak in global industrial growth is imminent; it's here right now. Markets are going to have to deal with the reality of a slowdown."

-- Lakshman Achuthan, Economic Cycle Research Institute
Other than demand, there can be many outside factors to explain the movement in commodity prices, including but not limited to:
  • changes in supply;
  • the level of speculative and risk-taking activity;
  • stockpiling decisions;
  • increase/decrease in margin requirements;
  • and fluctuating interest rates.
Nevertheless, the month of May brought the largest drop in commodity prices since the failure of Lehman Brothers (when commodities declined by 55% in the preceding five months in 2008 and signaled the deep fall in U.S. GDP), raising the specter that worldwide economic growth will disappoint in the quarters ahead.

According to Bloomberg, the Journal of Commerce Industrial Price Commodity Smoothed Price Index, "which tracks the growth rate of steel, cattle, hides, tallow and burlap, plunged by 57%" last month. This index is usually a reasonably good tell on prospective growth as it includes a number of commodities that aren't exchange-traded and are therefore less apt to be controlled by speculators. As well, the index of 18 industrial materials "declined the most since October 2008."

Many pay special attention to the price of Dr. Copper -- the commodity is famously said to have a PhD in economics. This is not surprising, for as seen in the chart below, the correlation between copper prices and the S&P 500 is unusually high.

Copper vs. S&P 500
Source: Bloomberg
Click for full view

Copper's 7.5% drop in May was steep, and represented the largest monthly drop since January.

I have no plans to skip Dr. Copper's classes. Rather, I am attentively listening to his lecture right now.

Doug Kass writes daily for RealMoney Silver , a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass's daily trading diary, please click here.

Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.