The global commodity market has noted significant volatility this year, with costs remaining largely elevated.
Orange juice and cocoa futures prices hit record highs in the first part of the year, while crude oil prices fluctuated in reaction to news from the Middle East. Gold prices have continued to rise, but base metals such as iron ore have seen a sharp decline.
“This year, commodity markets have been driven by sentiment and have been highly volatile – constantly looking for the slightest sign of optimism to reach new highs, only to retreat at the slightest trace of disappointment,” said Sabrin Chowdhury, director and head of Raw Tissue Analysis. in the BMI.
The S&P GSCI index, a key benchmark for overall commodity market performance, rose 12% year-to-date in April, before slowing to 2. 18% year-to-date. ‘year. According to FactSet data, the best performing products this year have been an agricultural products organization, added to cocoa, eggs, orange juice, rubber and coffee.
Unfavorable weather conditions in the main producing regions led to sharp increases in these raw materials.
The winners:
Cocoa: Leading the way, cocoa prices have risen 66% year-to-date, hitting a record high of $11,722 per metric ton in April due to bean shortages caused by supply disruptions due to heavy rains and disease at major producers. Hedge funds, lured through profit opportunities, have contributed the most to market volatility, according to Darren Stetzel, senior vice president of commodities for Asia at brokerage StoneX. Although prices have declined since then, cocoa futures remain above the same usual levels, trading at $9,150 per metric ton on the United States Intercontinental Exchange. Stetzel expects the cocoa market to stabilize as weather conditions improve in West Africa and prices will likely remain high for some time.
Eggs: A resurgence of bird flu in poultry facilities in the United States, Japan and other countries has led to the value of eggs rising by more than 62% per dozen since the beginning of the year, according to FactSet data. A dozen giant white eggs now cost $3. 57, according to the United States Department of Agriculture and the Bureau of Commodity Research. Avian flu has affected about 18. 5 million laying hens in the United States this year. As for demand, consumers are turning to eggs. as a major source of protein, said Karyn Rispoli, editor-in-chief of the trade data platform Expana. The value of wholesale eggs is expected to remain constant, especially if bird flu infections continue, according to Tim Luginsland, industry manager at Wells Fargo Food. and Beverage Institute.
Orange juice: Orange juice futures hit an all-time high in May and continue to hover around the traditionally high levels of $4. 49, consistent with the pound on ICE. Falling production in Florida, the top U. S. producer, coupled with unfavorable weather conditions in Brazil, pushed the industry into crisis mode. Global orange juice production is expected to decline for the fifth consecutive season due to the continued decline in production in Brazil, which accounts for 70% of global production. David Branch, head of the sector at Wells Fargo The Agribusiness Institute expects costs to remain high for at least the next 12 months, given the projected yields of orange crops.
Rubber: Rubber prices have risen about 30% since the beginning of the year due to falling production in Thailand and Indonesia, the world’s largest natural rubber manufacturers, caused by disease-related issues. climatic conditions, such as limited rainfall. The September contract for the benchmark Ribbed Smoke Sheet (RSS3) graded rubber futures contract is currently trading at 337 yen ($2. 29) per kg on the Osaka Stock Exchange.
Coffee: Coffee futures costs at ICE have risen 25% year-to-date to $2. 45 per pound, due to unfavorable weather conditions in Brazil’s major coffee-producing regions, according to BMI’s Chowdhury. El Niño-induced demand situations have also led to lower harvests in primary generating regions such as Viet Nam and Indonesia. El Niño is a climate phenomenon that leads to warmer temperatures and more extreme weather events, lasting between nine and 12 months.
The losers:
Iron ore: Iron ore prices have seen the biggest drop among commodities due to the ongoing crisis in China’s real estate sector, leading to weak demand. Deteriorating margins at metal mills in China, a key driving force for iron ore costs, also contributed to the decline, said Vivek Dhar, director of mining and energy commodity studies at Australia’s Commonwealth Bank. The benchmark iron ore with a grade of 62% was last quoted at $98. 10 per tonne on the New York Mercantile Exchange for the contract expiring on Aug. 30. Dhar noted that with metal mill margins at grades discouraging production, there are fears that iron ore costs would likely remain. less than $100 consistent with the ton in the short term.
Grains: Grains such as wheat, corn and soybeans have also seen significant declines, driven by what appears to be a bumper crop year in the Northern Hemisphere. Wells Fargo’s Luginsland explained that the global grain industry is experiencing a giant surplus lately due to back-to-back bumper harvests in all primary generating regions, which has led to lower prices. Wheat and corn trading on the Chicago Stock Exchange has fallen about 15% this year, while soybean trading has fallen nearly 25%.
Notable mentions:
Gold: Gold costs have hit record highs this year, driven by expectations of lower interest rates in the United States and the metal’s safe-haven appeal. Gold futures recently hit an all-time high of $2,549. 9 per ounce.
Despite the volatility, the global commodities market remains a leader and is expected to continue on this path, according to BMI’s Chowdhury. Securities are expected to be supported by a weaker US dollar, especially when the US Federal Reserve begins to cut rates later in the year. Weak Chinese demand is expected to limit price growth for most commodities, with most commodity metals likely to suffer further losses.
In addition, the global climate regime is expected to change from El Niño to La Niña by the end of this year, which could be a critical time for the global agricultural market, according to StoneX’s Stetzel. La Niña has a cooling effect on global temperatures. and it happens every three to five years. Stetzel noted that this would lead to weather patterns contrary to those observed last year as we approach 2025.
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