In this context, a report published by the American network (CNBC) and reviewed by the “Sky News Arabia Economy” website, quoted Sabrin Chaudhry, Director and Head of the Commodity Analysis Department at “BMI”, as saying that commodity markets were driven by emotions and volatile, in a constant search for the slightest sign of hope to reach new peaks, only to collapse again with the slightest hint of potential disappointment.
The S&P GSCI, a gauge of the performance of the overall commodities market, rose as much as 12 percent in April year-to-date, before retreating to a 2.18 percent gain so far.
According to data from FactSet, the commodities that have made the biggest gains since the beginning of the year are a select group of staples that include cocoa, eggs, orange juice, and coffee.
Analysts said these commodities saw strong gains as a result of bad weather in their main producing regions.
Biggest Winners
Cocoa is leading the gainers, with prices jumping 66 percent so far this year, with futures hitting a record $11,722 per metric ton in April, due to shortages caused by supply disruptions caused by heavy rains and disease in major producing countries including Cote d’Ivoire and Ghana.
Attracted by profit opportunities, hedge funds have entered the market, making price action more volatile, according to Darren Stitzel, senior vice president of soft commodities in Asia at StoneX.
Although prices have retreated from record levels, cocoa futures are still above normal levels, with the latest September contract trading at $9,150 per metric ton on the US ICE exchange.
Stitzel said the cocoa market would recover as weather conditions in West Africa improve by 2025, although he noted that prices would slowly return to levels seen before this year’s big surge.
Eggs
The recent outbreak of bird flu in poultry facilities in the United States, Japan and other countries has sent egg prices up more than 62 percent per dozen since the start of the year, with a dozen eggs currently selling for $3.57, according to FactSet data citing the U.S. Department of Agriculture and the Bureau of Commodity Research.
This year, about 18.5 million chickens in the United States have been affected by the bird flu virus, and on the demand side, consumers are becoming more reliant on eggs as a cheaper source of protein, the report quoted Karen Rispoli, editor-in-chief of market intelligence platform Expana, as saying.
orange juice
Orange juice futures also hit a record high in May, currently hovering around a record high of $4.49 on the Intercontinental Exchange. Declining production in Florida, the largest producer of orange juice in the United States, combined with severe weather caused by climate change in key orange-producing regions of Brazil, have pushed the industry into crisis.
That is unlikely to change anytime soon, with global orange juice production set to shrink for the fifth consecutive season due to continued declines in Brazil, which accounts for 70 percent of global production.
“CNBC” quoted David Branch, director of the Agricultural and Food Institute sector at Wells Fargo, as saying that given the estimates of the orange crop for the coming season, orange juice prices are expected to remain high for at least the next 12 months.
Rubber
Rubber prices have jumped about 30 percent since the start of the year due to lower production in the world’s top natural rubber producers, Thailand and Indonesia, due to weather problems such as lack of rain.
The September contract for Ribbed Smoke Sheet (RSS3) rubber is trading at 337 yen ($2.29) per kilogram on the Osaka Exchange.
On the demand side, several factors have pushed prices higher, such as a significant increase in demand from China’s electric vehicle sector, according to StoneX’s associate vice president, Kang Weiqiang. The automotive sector accounts for about two-thirds of global natural rubber consumption.
Coffee
ICE coffee futures have jumped 25 percent since the start of the year to $2.45 a pound due to adverse weather conditions in coffee-growing regions in southeastern Brazil, Sabrin Chaudhry of MBI told CNBC.
Production challenges caused by El Niño in Southeast Asia have caused crop declines in key producing areas of Vietnam and Indonesia.
El Niño is a climate phenomenon that causes higher temperatures and more extreme weather conditions, and typically lasts between nine and 12 months.
Biggest loser
The network quoted Vivek Dhar, Director of Mining and Energy Research at the Commonwealth Bank of Australia, as saying that iron ore prices have fallen significantly, due to the continued deterioration of the real estate sector in China, which has led to weak demand. The deterioration of the margins of the country’s steel mills, which is an important driver of iron ore prices, has also contributed to keeping prices low, as iron ore is a key component of steel.
Iron ore with a 62 percent grade was last traded at $98.10 a tonne on the New York Mercantile Exchange for the contract expiring Aug. 30.
“The main factor weighing on steel consumption in China remains the real estate sector (30 percent of China’s steel consumption),” Dar said in a recent note.
“With steel mill margins at levels that are severely constraining production, markets are justifiably concerned that iron ore prices may remain below $100/tonne in the near term,” he added.
grains
Widely consumed grains such as wheat, corn and soybeans also saw significant declines in what appears to be a bumper harvest year in the Northern Hemisphere.
“The global grain industry is currently experiencing a significant inventory surplus due to large, consecutive crop productions in all major producing regions,” said Tim Loginsland, director of the Agricultural and Food Institute at Wells Fargo. “As a result, larger quantities of corn and soybeans have flooded the export market, pushing prices down.”
Chicago Board of Trade wheat and corn prices have fallen about 15 percent so far this year, while soybean prices are down about 25 percent.
gold
Gold prices have risen to record highs this year, driven by expectations of lower interest rates in the United States, as well as gold’s appeal as a safe haven asset, with gold futures recently hitting another record high of $2,549.9 per ounce.
The American network quoted Sabrin Chaudhry from BMI as expecting:
- Despite the volatility this year, the global commodities market remains high and is expected to remain so.
- Prices are likely to be supported by a weaker US dollar, especially as the US Federal Reserve begins to cut rates later in the year.
- Continued weak demand from China will cap price growth across most commodities, with further losses expected for industrial metals.
According to Darren Stitzel of StoneX, the global weather pattern shift from El Niño to La Niña by the end of this year could be a defining event for the global agricultural market. La Niñas typically bring cooling effects to global temperatures and occur every three to five years.
“This means that the weather conditions we saw last year will be in stark contrast to those we expect to see heading into 2025,” he added.
price fluctuations
For his part, the head of global markets at Cedra Markets, Joe Yarak, said in exclusive statements to the “Sky News Arabia Economy” website that commodity prices witnessed sharp fluctuations this year, whether metals or grains, noting that the commodity index reached high levels at the beginning of the year, reaching 12 percent, and now it is around 2.3 percent.
He said that many commodities witnessed an increase, and that the most significant increases were cocoa, oranges, eggs, coffee, gold and silver, while the major declines were in iron, cotton and wheat.
He explained that:
- The rise in cocoa was linked to the high demand for it by cocoa and chocolate producers, and was also affected by the low supply from the first exporters in Côte d’Ivoire and Ghana, which had a major impact. For the first time in history, the price of a cocoa contract exceeded $10,000, reaching $11,700, noting that the last four years have witnessed a significant increase in demand over supply.
- Egg prices have skyrocketed due to bird flu.
- Gold and silver rose by 25 percent, as the use of gold as a hedging tool in the event of any crises was a reason for its price to rise.
- The biggest loser was iron ore, which is used in the real estate development and construction sector, affected by the collapse of the sector in China, which has an impact on the price, especially since demand has become less than it was before.
- Cereals also declined due to higher than normal production, and next year 2025 is expected to witness a climate change with colder weather, making agricultural production more abundant.
Geopolitical crises push markets higher
Meanwhile, economic expert and member of the board of directors of Al-Hurriya Securities Company, Dr. Hanan Ramses, said in exclusive statements to the “Sky News Arabia Economy” website that this year the markets witnessed a variation in commodity prices, explaining that some commodities witnessed strong increases, including basic materials, due to geopolitical developments and the impact on supply chains.
She stressed that the winners from the increases witnessed by the markets are the traders who raise prices and determine the profit margin in addition to their control over the export of goods, in addition to the economic blocs, for example the US-Europe bloc against Russia, which affected the supplies of Russian wheat, in order to focus on Ukrainian wheat after the imposition of economic sanctions on Moscow.
She stated that if the geopolitical crises continue, especially the war in Ukraine and the ongoing escalation of the war in Gaza, it is expected that commodity prices will continue to rise, and each country will try to have internal production, such as expanding agriculture and achieving self-sufficiency, so as not to resort to importing from abroad and being affected by supply chains.
She stated that the abundant production of goods and the ability to trade will lead to a decrease in the prices of goods, while the opposite is true for unavailable goods, explaining that the rise and fall of prices is controlled by supply and demand, geopolitical crises, economic sanctions, diplomatic cooperation and economic blocs such as BRICS, for example.
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