The year 2024 has seen increased volatility in the commodities market, especially for the likes of cocoa and coffee.
Cocoa and coffee prices are on course to end the year as the top gainers in the commodity complex, while steel-making coal is likely to finish 2024 as the worst performer.
Cocoa and coffee prices rose sharply in 2024 due to the global supply deficit, while coal was hit by slow growth in consumption in China.
In 2025, global tensions are expected to lend cues to the commodities market even as Donald Trump returns to the White House, according to Reuters.
Meanwhile, increased demand for safe-haven assets is expected to support prices of precious metals, while an oversupply may weigh on the oil market next year.
Cocoa price surges
This year, cocoa prices nearly tripled, which could affect chocolate lovers around the globe. Prices had hit a record high of $12,931 per ton in New York in early December on supply concerns.
Forecasts suggest dry weather in West Africa, which is expected to lead to a fourth successive season of lower supply.
Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen told Reuters:
The softs sector, led by cocoa and coffee, has been the main winner amid adverse weather in key growing regions, highlighting the risk to prices when products like these are produced and sourced from relatively small geographical areas.
In major growing regions such as the Ivory Coast and Ghana, farmers had suffered crop losses as a result of bean diseases, adverse weather and reduced plantation.
Dry weather in Africa has also affected supplies of coffee.
Prices of Arabica coffee on the Intercontinental Exchange soared to their highest level this year amid fears of a lower upcoming crop in Brazil. Drought in Brazil exacerbated the challenges for farmers.
Oil and iron ore prices decline on China growth concern
Prices of crude oil and bulk metals were subdued in 2024 as China struggled with its economic activities. The country faced headwinds from the ongoing property crisis.
Both West Texas Intermediate crude and Brent oil could not sustain gains this year despite steep production cuts by the Organization of the Petroleum Exporting Countries.
Both benchmarks could post a third consecutive annual decline in 2025, according to Reuters.
One of the major concerns in the oil market is oversupply in the coming year. The International Energy Agency has estimated that crude oil supply next year is likely to average around 1.9 million barrels per day, while demand growth is seen at 1.1 million barrels per day.
As supply outstrips demand growth, there are additional concerns about more production coming out of the world’s biggest producer of oil, the US.
With Trump set for his second presidency, experts believe that oil production from the US will rise in the medium to long term.
The IEA said crude oil supply growth is expected to be mostly concentrated in the US, Guyana, Brazil, Argentina and Canada next year.
Additionally, iron ore prices are set to end the year with a 15% decline. Prices are expected to fall further in 2025 as supply is likely to grow, while steel demand in China falters.
“We expect the increase in iron ore supply from major miners will be higher than that in 2024, but steel output in China will likely slide,” Pei Hao, senior analyst at brokerage Freight Investor Services, told Reuters, forecasting an average price of $100 a ton in 2025, down from an average of $110 in 2024.
Precious metals prices
Both gold and silver have had a stellar 2024. Gold prices are set to end the year with a 27% gain, while silver has risen more than 21% in 2024.
In 2024, gold and silver were supported by interest rate cuts by global central banks, geopolitical tensions and the US presidential elections.
Additionally, Trump’s proposed tax cuts and tariffs are expected to accelerate US inflation, which could be positive for precious metals in 2025.
However, the US Federal Reserve has signalled that it would be more cautious with rate cuts next year amid a resilient labour market and sticky inflation.
The outlook for fewer rate cuts in 2025 could affect gold and silver prices.
Among base metals, copper and aluminium will end 2024 higher, driven by tight supplies, the energy transition and hopes that China’s stimulus measures will boost demand.
Palm oil, rubber and grain prices
According to a report on Reuters, Malaysian palm oil futures jumped 20%, snapping two straight years of losses.
Prices had risen due to Indonesia’s biodiesel mandate and adverse weather in Indonesia and Malaysia.
Tokyo rubber futures also rose 42% in 2024 driven by weather woes, which hit crops in Japan.
Agricultural commodities such as soybeans, corn and wheat were plenty in supply in 2024. This weighed on prices of these commodities.
However, in 2025, wheat prices may find some support due to warmer weather in Russia, which could reduce production. Russia is the biggest exporter of wheat.
In terms of soybeans, Brazil has been preparing to meet a rise in demand from China in case Washington and Beijing resume their trade war.
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