With only a few trading sessions left in 2024, it’s clear the year has been a tumultuous one for commodities, particularly for softs and precious metals. Conversely, it proved a disappointing period for grains and natural gas.
2024’s Winners:
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Create account Try a demo Download mobile app Download mobile app- Cocoa: The largest deficit in history, coupled with concerns about the 2024/25 season, fuelled a surge of over 360% including rolling. Prices recently breached $12,000 per tonne.
- Coffee: Saw gains of approximately 150% including futures contract rollovers. Although coffee inventories increased this year, they remain extremely low. While a significant oversupply was projected for the 2024/25 season just months ago, adverse weather in Brazil and Vietnam points to a continued market deficit.
- Gold: Experienced a near 30% rise on the spot market and almost 20% in futures contracts. Gold reached record highs amid geopolitical uncertainties and the commencement of interest rate cuts in the US and other central banks globally.
2024’s Losers:
- Natural Gas (Natgas): While current prices are relatively high, they remain around 15% below levels seen at the start of January. Including rolling, losses amount to approximately 70%, driven by one of the largest contango periods in history.
- Wheat: Despite declining global wheat stocks in recent years, global demand saw only moderate growth in 2024. Furthermore, oversupply is growing in the US, a key price-setting market. Abundant wheat availability from major exporters such as Russia and Ukraine has intensified price competition.
- Corn: Despite a global deficit, prices fell due to a significantly better-than-expected US production season. Production also rebounded in South America and China.
Changes in commodity futures contracts in 2024. Source: Bloomberg Finance LP
Looking to 2025:
The coming year may hold several surprises, largely contingent on political decisions. Oil could face significant declines given limited scope for economic growth. Should OPEC+ partially restore production, an oil oversupply would likely emerge. Cheaper oil in the $50-60 range could help bring inflation back to target sooner and ultimately pave the way for economic recovery in the following years.
Agricultural commodity markets will be heavily influenced by potential trade tariff decisions. There's a possibility of Mexico and China reducing imports of US corn, soy, and wheat. Conversely, trade agreements would be a positive development, stimulating market activity.
Coffee and cocoa may continue their upward trajectory, at least in the short term, due to production uncertainties. However, profit-taking could follow once final harvest data becomes available.
Gold and silver have the potential for further gains, although they are susceptible to the Federal Reserve’s decisions regarding pausing rate cuts. Global trade tensions should support price increases. Conversely, if a lasting resolution to the war in Ukraine and the Middle East conflict is achieved, the risk premium on gold, potentially as high as 10-20%, could be erased.
In a broader context, the commodities market remained in consolidation in 2024, driven by downward pressure in the oil market. Source: xStation5
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