The commodity market in 2024 witnessed a dramatic divergence in performance. Cocoa and coffee emerged as the star performers for the second consecutive year, driven by global supply deficits. Conversely, steel-making coal suffered the steepest decline, weighed down by sluggish growth in China. Looking ahead to 2025, global trade tensions, particularly with the return of Donald Trump to the White House and his potential tariff policies, are expected to significantly influence the commodity landscape.
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Cocoa and Coffee Reign Supreme Amidst Supply Shortages
Chocolate lovers faced sticker shock in 2024 as cocoa prices nearly tripled, significantly outperforming other commodities. A record high of $12,931 per metric ton was reached in New York earlier this month, fueled by projections of a fourth consecutive season of lower supply in West Africa due to persistent dry weather.
“The softs sector, spearheaded by cocoa and coffee, has emerged victorious amidst unfavorable weather conditions in key growing regions,” noted Ole Hansen, Head of Commodity Strategy at Saxo Bank in Copenhagen. “This underscores the price vulnerability of products sourced from relatively concentrated geographical areas.”
Adverse weather, bean disease, smuggling, and the shift towards illegal gold mining have plagued leading cocoa producers Ivory Coast and Ghana, resulting in significant crop losses. Similarly, coffee supplies have been strained by dry conditions. ICE Arabica coffee prices surged to a 40-year high on concerns that severe drought in Brazil, the world’s largest producer, has damaged the upcoming crop.
China’s Economic Woes Impact Oil and Iron Ore
Crude oil and bulk metals faced significant headwinds in 2024 as China, a major consumer of commodities, grappled with a property crisis and broader economic slowdown. Analysts predict that Brent and West Texas Intermediate crude could experience a third consecutive annual decline in 2025 due to supply exceeding demand growth. However, Trump’s policies towards major oil producers Russia and Iran could potentially constrain supply.
OPEC’s spare capacity has reached an unprecedented 5 million barrels per day, according to analyst estimates, with the organization extending production cuts to March. “The challenging inventory outlook for the upcoming year suggests OPEC+ will face difficulties in bringing barrels back to the market,” commented Harry Tchilinguirian, Head of Research at Onyx Capital Group.
Iron ore prices in China have partially recovered in recent months but are still on track for a 15% decline in 2024. Analysts anticipate further price drops in 2025 as iron ore supply increases and Chinese steel demand weakens, despite Beijing’s stimulus efforts. Pei Hao, Senior Analyst at Freight Investor Services, projects an average iron ore price of $100 per ton in 2025, down from $110 in 2024.
Precious Metals Shine, Agricultural Markets Mixed
Gold and silver prices surged over 25% in 2024 and have the potential for further gains in 2025, influenced by the U.S. Federal Reserve’s interest rate decisions and Trump’s trade, tax, and foreign policies. “Gold stands out as a top performer for us in 2025,” stated Warren Patterson, Head of Commodity Research at ING, citing strong central bank gold purchases as a key demand driver.
Copper and aluminum prices are expected to end 2024 on a positive note, driven by tight supplies, the ongoing energy transition, and hopes of increased demand from China’s stimulus measures.
In agricultural markets, Malaysian palm oil futures rebounded by approximately 20% in 2024, reversing two years of losses, thanks to Indonesia’s biodiesel mandate and unfavorable weather in Indonesia and Malaysia. Unfavorable weather also propelled Tokyo rubber futures to a 42% gain.
Conversely, abundant supplies of soybeans, corn, and wheat led to losses in 2024. However, wheat prices might find support in 2025 as warmer weather in Russia, the largest exporter, threatens production. Brazil, the leading soybean exporter, is projected to deliver record supplies in 2025, potentially enabling it to satisfy increased Chinese demand if a trade war between Washington and Beijing erupts.
Conclusion: A Year of Divergence and Uncertainty
2024 proved to be a year of stark contrasts in the commodity market, with supply-driven gains in cocoa and coffee juxtaposed against weakness in coal and iron ore due to China’s economic slowdown. As we move into 2025, the resurgence of global trade tensions under a new presidential administration introduces a layer of uncertainty, poised to significantly shape commodity price trends and investor sentiment. The interplay between geopolitical developments, monetary policy, and supply-demand dynamics will be crucial in determining the winners and losers in the year ahead.
