Commodity markets stabilize after November turbulence

ISTANBUL

Commodity markets experienced sharp fluctuations in November, triggered by the US election results following President-elect Donald Trump’s victory and expectations that the Federal Reserve (Fed) may adopt a slower-than-expected approach in rate cuts, while supply concerns grew.

Trump’s protectionist policies are predicted to limit inflation decline, contributing to expectations that interest rates may stay above forecasts.

Commodity prices came under pressure as the US Dollar Index gained momentum following the elections.

Analysts noted that the strengthening US dollar, resulting from Trump’s win, impacted risk appetite, with the possibility of further volatility due to uncertainties surrounding the economic and foreign policies of the incoming Trump administration.

Trump’s protectionist measures and the Fed’s decisions may not align, complicating price predictions.

Fed Chairman Jerome Powell indicated that the US economy showed no signs of urgency for rate cuts, further fueling selling pressure.

Meanwhile, the price of gold fell 3.4% in November as the US Dollar Index reached a one-year peak. Platinum declined 4.6%, silver 6.2%, and palladium 12.2%.

Copper’s price in pounds dropped 5.8%, heavily impacted by inadequate stimulus in China and Trump’s planned tariffs. Lead fell 2.2%, and nickel 1.8%, while zinc increased 2.9%.

In the energy sector, Brent crude oil’s price fell 2.3% in November due to ongoing demand concerns. The OPEC group lowered its 2024 demand forecast for the fourth consecutive year, citing concerns over China, while increasing stocks in the US fueled oversupply worries.

Expectations that ceasefire talks in the Middle East could yield positive results also contributed to the decline in Brent crude oil.

The International Energy Agency (IEA) reported that oil supply would surpass demand in 2025, even if OPEC and its allies maintain current production cuts.

Conversely, natural gas prices on the New York Mercantile Exchange surged 24.2%.

In the agricultural sector, coffee prices reached their historic peak at $3.3545 per pound in November, driven by concerns over continued dry weather and frosts in Brazil. Houthi attacks in the Red Sea also slowed coffee shipments from Asia to Europe, while extreme heat and droughts in Southeast Asia lowered harvests.

Coffee yields are expected to decline further as La Nina weather effects intensify.

The EU is preparing to delay deforestation legislation for a year, which will prevent imports of products from deforested areas, such as soy, beef, palm oil, wood, cocoa, and coffee, boosting prices.

Italian coffeemaker Lavazza CEO Giuseppe Lavazza predicted that coffee prices could double due to global inflation and climate change.

The price of cocoa surged 36.3% in November, driven by poor-quality beans being rejected by exporters in the Ivory Coast, which is expected to impact global supply. The decline in cocoa harvests in the country further contributed to the price increase.

Cotton rose 3.1% in November, driven by forecasts of a global cotton production decrease, while sugar fell 7.3% due to above-average monsoon rains in India, creating supply concerns.

Meanwhile, the bushel price of wheat fell 2.7%, soybeans 0.4%, while corn rose 5.4%, and rice 3.5% on the Chicago Mercantile Exchange.

*Writing by Emir Yildirim