Futures for orange juice and cocoa surged to record highs in the first half of the year, while crude oil prices fluctuated in response to news from the Middle East. Gold prices have continued to rise, but base metals like iron ore saw a considerable decline.
“Commodity markets this year have been driven by sentiment and have been highly volatile — constantly searching for any sign of optimism to reach new highs, only to fall back at the slightest hint of disappointment,” said Sabrin Chowdhury, director and head of commodities analysis at BMI.
The S&P GSCI, a key benchmark for overall commodity market performance, rose by as much as 12% in April from the start of the year, before tapering off to a 2.18% increase year-to-date. According to data from FactSet, the top-performing commodities this year have been a select group of soft commodities, including cocoa, eggs, orange juice, rubber, and coffee.
Adverse weather conditions in the main production regions have driven the strong gains in these commodities.
Biggest Winners:
Cocoa:
Leading the charge, cocoa prices have jumped 66% so far this year, reaching an all-time high of $11,722 per metric tonne in April due to a bean shortage caused by supply disruptions from heavy rains and disease in key producers Ivory Coast and Ghana. Hedge funds, attracted by profit opportunities, further contributed to the market’s volatility, according to Darren Stetzel, senior vice president of soft commodities for Asia at brokerage StoneX. While prices have since tapered, cocoa futures remain above typical levels, trading at $9,150 per metric tonne on the U.S. Intercontinental Exchange. Stetzel expects the cocoa market to stabilise as weather conditions improve in West Africa, though prices will likely remain elevated for some time.
Eggs:
A resurgence of avian influenza in poultry facilities across the U.S., Japan, and other nations has caused egg prices to rise over 62% per dozen since the start of the year, according to FactSet data. The spot price for a dozen large white eggs now stands at $3.57, according to the U.S. Department of Agriculture and Commodity Research Bureau. The bird flu has affected about 18.5 million egg-laying hens in the U.S. this year. On the demand side, consumers have been turning to eggs as a more affordable source of protein, noted Karyn Rispoli, managing editor at market intelligence platform Expana. Higher wholesale egg prices are expected to persist, especially if avian flu infections continue, according to Tim Luginsland, sector manager at Wells Fargo’s Agri-Food Institute.
Orange Juice:
Orange juice futures hit a record high in May and continue to hover at historically high levels of $4.49 per pound on ICE. Production declines in Florida, the main U.S. producer, coupled with climate-fueled adverse weather in Brazil, have pushed the industry into crisis mode. Global orange juice production is expected to decline for the fifth consecutive season due to continued production drops in Brazil, which accounts for 70% of global output. David Branch, sector manager at Wells Fargo’s Agri-Food Institute, expects prices to remain elevated for at least the next 12 months given the projected orange crop yields.
Rubber:
Rubber prices have surged nearly 30% since the start of the year due to production declines in Thailand and Indonesia, the world’s largest natural rubber producers, caused by weather-related issues like limited rainfall. The September contract for the benchmark Ribbed Smoke Sheet graded (RSS3) rubber futures is currently trading at 337 yen ($2.29) per kg on the Osaka Stock Exchange.
Coffee:
Coffee futures on ICE have jumped 25% year-to-date to $2.45 per pound, driven by adverse weather conditions in Brazil’s key coffee-growing regions, according to BMI’s Chowdhury. El Niño-induced challenges have also caused crop declines in major producing regions like Vietnam and Indonesia. El Niño is a weather phenomenon that brings warmer temperatures and more extreme weather conditions, typically lasting between nine and 12 months.
Biggest Losers:
Iron Ore:
Iron ore prices have seen the steepest decline among commodities due to the ongoing slump in China’s property sector, leading to weak demand. Worsening steel mill margins in China, a key driver of iron ore prices, have also contributed to the decline, said Vivek Dhar, director of mining and energy commodities research at the Commonwealth Bank of Australia. The benchmark 62%-grade iron ore last traded at $98.10 per tonne on the New York Mercantile Exchange for the contract expiring Aug. 30. Dhar noted that with steel mill margins at levels that discourage production, there are concerns that iron ore prices may remain below $100 per tonne in the near term.
Grains:
Grains like wheat, corn, and soybeans have also experienced significant declines, driven by what appears to be a bumper crop year across the Northern Hemisphere. Wells Fargo’s Luginsland explained that the global grain industry currently has a large surplus due to consecutive large crops in all major production regions, leading to lower prices. Wheat and corn trading on the Chicago Board of Trade have both fallen by nearly 15% this year, while soybeans have dropped close to 25%.
Notable Mentions:
Gold:
Gold prices have rallied to record highs this year, driven by expectations of U.S. interest rate cuts and the metal’s appeal as a safe-haven asset. Gold futures recently hit an all-time high of $2,549.9 per ounce.
Despite the volatility, the global commodities market remains elevated and is expected to continue on this path, according to BMI’s Chowdhury. She forecasts that prices will be supported by a weakening U.S. dollar, especially as the U.S. Fed begins to cut rates later in the year. However, weak demand from China is expected to limit price growth across most commodities, with industrial metals likely to face further losses.
Additionally, the global weather pattern is expected to shift from El Niño to La Niña by the end of this year, which could be a critical event for the global agricultural market, according to StoneX’s Stetzel. La Niña usually brings a cooling effect on global temperatures and occurs every three to five years. Stetzel noted that this will result in weather conditions opposite to those seen in the past year as we head into 2025.