Ceres Tactical Commodity Posts Income Amidst Market Volatility

TL;DR

Ceres Tactical Commodity L.P. is making money, but watch out for their reliance on Morgan Stanley as a key counterparty.

AI Summary

Ceres Tactical Commodity L.P. reported a net investment income of $416.91 for the three months ended June 30, 2025, compared to a loss in the prior year period. The partnership's strategy involves commodity futures and non-exchange-traded contracts, with Morgan Stanley & Co. LLC (MS&Co.) serving as its commodity futures broker and sole counterparty for non-exchange-traded contracts. The filing highlights counterparty risk, noting that MS&Co. has the right to offset obligations with the Partnership's cash and U.S. Treasury bills held by MS&Co. in the event of default. For exchange-traded contracts, the clearinghouse interposes its credit, reducing counterparty risk. The partnership's net asset value per Redeemable Unit saw a change during the period, influenced by net realized and unrealized gains and losses. The financial statements indicate significant exposure to market fluctuations through its derivatives portfolio, including open forward contracts, futures contracts, and options. The partnership's operations are focused on generating returns through tactical commodity trading, with an emphasis on managing exposure to various market factors.

Why It Matters

This filing reveals Ceres Tactical Commodity L.P.'s performance in a dynamic commodity market, showing a shift to net investment income. For investors, understanding the partnership's reliance on MS&Co. as a counterparty and the mechanisms for mitigating default risk is crucial for assessing capital safety. Employees and customers are less directly impacted by this specific financial disclosure, but the partnership's stability affects its long-term viability. In the broader market, the performance of commodity-focused funds like Ceres can signal trends in investor sentiment towards raw materials and inflation hedges, influencing competitive strategies among similar investment vehicles.

Risk Assessment

Risk Level: medium — The partnership faces medium risk due to its significant exposure to counterparty risk with Morgan Stanley & Co. LLC (MS&Co.) as the sole counterparty for non-exchange-traded contracts. While MS&Co. has offset rights, the Partnership is still exposed to the amount shown in the Statements of Financial Condition if MS&Co. defaults. Additionally, the nature of commodity trading involves inherent market volatility.

Analyst Insight

Investors should scrutinize the partnership's counterparty risk management with Morgan Stanley & Co. LLC and assess the diversification of its commodity exposure. Consider the potential impact of a default by MS&Co. on the partnership's assets, despite the stated offset mechanisms.

Key Numbers

• $416.91 — Net investment income (for the three months ended June 30, 2025, indicating profitability)
• 2025-06-30 — Period End Date (the reporting period for this 10-Q)

Key Players & Entities

• Ceres Tactical Commodity L.P. (company) — filer of the 10-Q
• Morgan Stanley & Co. LLC (company) — commodity futures broker and sole counterparty for non-exchange-traded contracts
• $416.91 (dollar_amount) — net investment income for the three months ended June 30, 2025
• NY (regulator) — state of incorporation
• Ceres Managed Futures LLC (company) — business and mail address contact

FAQ

Risk Factors

• Counterparty Risk with MS&Co. [high — financial]: Ceres Tactical Commodity L.P. faces significant counterparty risk with Morgan Stanley & Co. LLC (MS&Co.), its sole counterparty for non-exchange-traded contracts. In case of default, MS&Co. has the right to offset the Partnership's obligations with the Partnership's cash and U.S. Treasury bills held by MS&Co. This exposure is particularly relevant as MS&Co. may not always post collateral, leaving the Partnership exposed to MS&Co.'s default.
• Market Fluctuation Exposure [high — market]: The partnership's financial performance is heavily influenced by market fluctuations due to its significant exposure to commodity futures and non-exchange-traded contracts. The net realized and unrealized gains and losses on these derivative instruments directly impact the net asset value per Redeemable Unit.
• Reliance on Broker and Counterparty [medium — operational]: The partnership's operations are critically dependent on its commodity futures broker, MS&Co., and its role as the sole counterparty for non-exchange-traded contracts. Any operational issues or changes in the relationship with MS&Co. could materially affect the partnership's ability to execute its trading strategy and manage its positions.

Industry Context

The commodity trading landscape is characterized by high volatility and significant reliance on derivative instruments. Firms like Ceres Tactical Commodity L.P. operate in a competitive environment where success hinges on sophisticated trading strategies and robust risk management. Key trends include the increasing use of technology for algorithmic trading and the growing importance of managing counterparty risk, especially in over-the-counter markets.

Regulatory Implications

As a commodity trading partnership, Ceres is subject to regulations governing derivatives markets and investment partnerships. The reliance on a single broker and counterparty like MS&Co. may attract scrutiny regarding due diligence and risk mitigation practices. Compliance with reporting requirements and market conduct rules is essential to avoid penalties and maintain operational integrity.

What Investors Should Do

1. Review MS&Co. counterparty risk disclosures carefully.
2. Monitor the impact of market volatility on NAV.
3. Assess the partnership's strategy for managing derivative exposures.

Key Dates

• 2025-06-30: Period End Date — Marks the end of the reporting period for the 10-Q filing, providing the latest financial snapshot.
• 2025-08-08: Filing Date — Indicates when the 10-Q report was officially submitted to the SEC.
• 2025-04-01: Start of Second Quarter 2025 — Beginning of the three-month period for which financial results are reported.
• 2024-06-30: Prior Year Period End Date — Provides a comparative point for the current period's financial performance.

Glossary

Net investment income

The income generated from a company's investments after deducting all expenses. For Ceres, this includes interest income less total expenses. (This is a key profitability metric for the partnership, showing its performance from its core investment activities.)

Commodity futures contracts

Standardized contracts to buy or sell a specific commodity at a predetermined price on a future date. Traded on exchanges. (These are a primary instrument used by Ceres for its tactical trading strategy, exposing it to market price movements.)

Non-exchange-traded contracts

Over-the-counter (OTC) derivative contracts that are not traded on a formal exchange. They are customized and bilateral. (Ceres uses these contracts, with MS&Co. as its sole counterparty, introducing specific counterparty risks.)

Counterparty risk

The risk that the other party in a financial contract will default on its obligations. (A significant risk factor for Ceres, particularly with its non-exchange-traded contracts where MS&Co. is the sole counterparty.)

Net asset value (NAV) per Redeemable Unit

The market value of a fund's assets minus its liabilities, divided by the number of outstanding redeemable units. (This metric reflects the per-unit value of the partnership's holdings and is directly impacted by trading gains and losses.)

Clearinghouse

An intermediary between buyers and sellers in derivatives markets that guarantees the performance of contracts, reducing counterparty risk. (For exchange-traded contracts, the clearinghouse interposes its credit, mitigating risk for Ceres.)

Year-Over-Year Comparison

For the three months ended June 30, 2025, Ceres Tactical Commodity L.P. reported net investment income of $416.91, a significant improvement compared to a loss in the prior year period. This shift indicates a positive change in the partnership's operational profitability. While specific revenue figures and margin changes are not detailed in the provided summary, the increase in net investment income suggests improved trading performance or reduced expenses relative to the prior year. No new material risks were highlighted in the summary, but the existing risks related to counterparty exposure and market volatility remain critical.

Filing Documents

• d908323d10q.htm (10-Q) — 2292KB
• d908323dex311.htm (EX-31.1) — 10KB
• d908323dex312.htm (EX-31.2) — 10KB
• d908323dex321.htm (EX-32.1) — 4KB
• d908323dex322.htm (EX-32.2) — 4KB
• 0001193125-25-176447.txt ( ) — 8821KB
• ck0001325676-20250630.xsd (EX-101.SCH) — 690KB
• d908323d10q_htm.xml (XML) — 2371KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item1. Financial Statements . Ceres Tactical Commodity L.P. June 30, 2025 (Unaudited) December 31, 2024 Assets: Investment in the Fund (1) , at fair value $ 14,010,036 $ 17,511,230 Redemptions receivable from the Fund 40,058 3,866,784 Equity in trading account: Unrestricted cash 96,215,759 98,005,370 Restricted cash 4,925,480 7,364,913 Foreign cash (cost $ 417,002 and $ 173,642 at June 30, 2025 and December 31, 2024, respectively) 472,934 179,838 Net unrealized appreciation on open futures contracts 640,612 - Options purchased, at fair value (premiums paid $ 4,522,303 and $ 6,183,472 at June 30, 2025 and December 31, 2024, respectively) 3,329,589 5,354,371 Total equity in trading account 105,584,374 110,904,492 Interest receivable 333,392 369,641 Total assets $ 119,967,860 $ 132,652,147 Liabilities and Partners' Capital: Liabilities: Net unrealized depreciation on open futures contracts $ - $ 200,937 Net unrealized depreciation on open forward contracts 78,698 197,928 Options written, at fair value (premiums received $ 670,148 and $ 3,312,604 at June 30, 2025 and December 31, 2024, respectively) 606,538 3,281,715 Accrued expenses: Ongoing selling agent fees 73,122 78,946 Management fees 111,279 120,743 General Partner fees 74,369 80,446 Incentive fees - 663,398 Professional fees 219,864 178,793 Redemptions payable to General Partner - 149,980 Redemptions payable to Limited Partners 2,761,436 4,504,014 Total liabilities 3,925,306 9,456,900 Partners' Capital: General Partner, Class Z , 602.1040 Redeemable Units outstanding at June 30, 2025 and December 31, 2024 1,347,295 1,317,374 Limited Partners, Class A, 42,420.4597 and 45,958.9087 Redeemable Units outstanding at June 30, 2025 and December 31, 2024, respectively 113,549,978 120,743,082 Limited Partners, Class D ,

Notes to Financial Statements

Notes to Financial Statements (Unaudited) 1. Organization: Ceres Tactical Commodity L.P. (the "Partnership") is a limited partnership organized on April 20, 2005 under the partnership laws of the State of New York to engage, directly and indirectly, in the speculative trading of commodity interests on United States ("U.S.") and international futures, options on futures and forward markets. The Partnership may also engage, directly or indirectly, in swap transactions and other derivative transactions with the approval of the General Partner (as defined below). Initially, the Partnership's investment strategy focused on energy and energy-related investments. While the Partnership is expected to continue to have significant exposure to energy and energy-related markets, such trading will no longer be the Partnership's primary focus. Therefore, the Partnership's past trading performance will not necessarily be indicative of future results. The sectors traded include energy, grains, livestock, metals and softs. The commodity interests that are traded by the Partnership, directly or indirectly through its investment in the Funds (as defined below) are volatile and involve a high degree of market risk. The General Partner may also determine to invest up to all of the Partnership's assets (directly or indirectly through its investment in the Funds) in U.S. Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates. During the initial offering period, the Partnership sold 11,925 redeemable units of limited partnership interest ("Redeemable Units"). The Partnership commenced trading on September 6, 2005. The Partnership privately and continuously offers Redeemable Units to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership. Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the "General Partner") and com

Notes to Financial Statements

Notes to Financial Statements (Unaudited) The programs traded by each Advisor on behalf of the Partnership are: Millburn — Commodity Program, Ospraie — Commodity Program, Drakewood – Drakewood Prospect Fund Strategy, Opus – Opus Advanced Ag Program and prior to Northlander's termination effective December 31, 2024, Northlander – Commodity Program and prior to EMC's termination effective December 31, 2024, EMC – Commodity Program. The General Partner may modify or terminate the allocation of assets among the Advisors at any time and may allocate assets to additional Advisors at any time. The Partnership and CMF Drakewood Master Fund LLC ("Drakewood Master") have entered, and (prior to its termination) NL Master had entered, into futures brokerage account agreements with MS&Co. Drakewood Master is referred to as the "Fund." References herein to "Funds" may also include, as relevant, NL Master. The Partnership, directly and through its investment in the Funds, pays MS&Co. (or will reimburse MS&Co. if previously paid) its allocable share of all trading fees for the clearing and, where applicable, the execution of transactions as well as exchange, user, give-up, floor brokerage and National Futures Association fees (collectively, the "clearing fees"). The Partnership has entered into a selling agreement with Morgan Stanley Wealth Management (the "Selling Agreement"). Under the Selling Agreement the Partnership pays Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to 0.75 % per year of adjusted month-end net assets for Class A and Class D Redeemable Units. Morgan Stanley Wealth Management pays a portion of its ongoing selling agent fees to properly registered or exempted financial advisors who have sold Class A and Class D Redeemable Units. The ongoing selling agent fees for the three and six months ended June 30, 2025 for Class A were $ 219,610 and $ 448,717 , respectively. The ongoing selling agent fees for the three and six months

Notes to Financial Statements

Notes to Financial Statements (Unaudited) Use of Estimates. The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates, and those differences could be material. Profit Allocation. Except for class specific expenses , the General Partner and each limited partner of the Partnership share in the profits and losses of the Partnership in proportion to the amount of Partnership interest owned by each, except that no limited partner is liable for obligations of the Partnership in excess of its capital contributions and profits, if any, net of distributions or redemptions and losses, if any. The Partnership has not provided a Statement of Cash Flows, as permitted by Accounting Standards Codification ("ASC") 230, "Statement of Cash Flows." The Statements of Changes in Partners' Capital is included herein, and as of and for the periods ended June 30, 2025 and 2024, the Partnership carried no debt and all of the Partnership's and the Funds' investments were carried at fair value and classified as Level 1 or Level 2 measurements. Partnership's Investment in the Funds. The Partnership carries its investment in Drakewood Master based on the Partnership's (1) net contribution to Drakewood Master and (2) its allocated share of the undistributed profits and losses, including realized gains or losses and net change in unrealized gains or losses, of Drakewood Master. The Partnership carried its investment in NL Master based on the Partnership's (1) net contribution to NL Master and (2) its allocated share of the undistributed pr

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