Commodities Outlook: Cocoa and Coffee Shine, Steel-Making Coal Struggles
As the year comes to a close, commodities are wrapping up 2024 with a mixed bag of performances. Cocoa and coffee are emerging as the top gainers, driven by global supply deficits and adverse weather conditions in key growing regions.
Weather Woes Impact Cocoa and Coffee
Cocoa prices have nearly tripled in 2024, reaching a record high of $12,931 a metric ton in New York. The surge is attributed to forecasts of lower supply for a fourth successive season in West Africa, following dry weather. Top producers Ivory Coast and Ghana have suffered crop losses due to adverse weather, bean disease, smuggling, and reduced plantations in favor of illegal gold mining. Similarly, dryness has strained coffee supplies, with ICE Arabica coffee prices soaring to their highest in more than 40 years.
Oil and Metals Face Headwinds
In contrast, crude oil and bulk metals have faced significant challenges in 2024. China’s property crisis has led to slow growth, impacting demand for these commodities. Brent and West Texas Intermediate crude are expected to post a third consecutive annual decline in 2025, as supply outstrips demand growth. Spare capacity in OPEC has reached an unprecedented 5 million barrels per day, making it challenging for the group to bring back barrels into the market.
Iron Ore Prices Slump
Iron ore prices in China have recouped some losses in recent months but are still headed for a 15% decline in 2024. Prices could fall again next year as iron ore supply grows and Chinese steel demand falls, despite Beijing’s stimulus measures.
Precious Metals Shine
Gold and silver have risen more than 25% in 2024 and could climb further in the year ahead, depending on the U.S. Federal Reserve’s interest rate cuts and Trump’s tariff, tax, and foreign policies. Strong gold purchases by central banks will support demand, making gold a standout performer in 2025.
Agricultural Products: A Mixed Bag
Malaysian palm oil futures have jumped around 20% in 2024, lifted by Indonesia’s biodiesel mandate and adverse weather in Indonesia and Malaysia. Crop-threatening weather has also driven a 42% gain in Tokyo rubber futures. However, soybeans, corn, and wheat are in plentiful supply, all on track for losses in 2024. Wheat prices could find some support in 2025 as warmer weather in Russia threatens to reduce output.
Looking Ahead to 2025
As global trade tensions are likely to dominate the commodities landscape in 2025, investors are bracing for a volatile year ahead. A strong dollar and gold’s appeal as a safe haven will support precious metals prices, while ample supply could depress oil for a third year. The agricultural sector will continue to be influenced by weather patterns and government policies, making it a crucial area to watch in the coming year.
Leave a Reply