Commodities were driven by a mix of geopolitical uncertainty, climate change impacts, and technological advancements. Here’s a look at three of the standout performers:
Cocoa futures skyrocketed by 176% in 2024, thanks to climate-induced weather disruptions in West Africa, the world’s largest cocoa-producing region. Underinvestment in cocoa farms also played a role, with growers struggling to replant diseased trees, according to Tracy Allen, agricultural commodities strategist at JPMorgan. The Hershey Co. even projected flat earnings growth due to cocoa’s soaring price.
Coffee futures climbed 73%, reaching a 47-year high. Extreme weather in Brazil and Vietnam, coupled with booming demand in markets like China, created a perfect storm for coffee prices. While this was good news for investors, it meant higher prices for consumers as companies passed on the costs.
Among precious metals, silver stood out, gaining over 27%. Its appeal as a hedge against economic uncertainty, combined with its critical role in AI hardware, electric vehicles, and renewable energy technologies, solidified its place as a must-have commodity.
Looking Ahead to 2025
The success of commodities in 2024 highlights their sensitivity to global supply and demand dynamics. Kristian Kerr, Head of Macro Strategy at LPL Financial, emphasizes the influence of geopolitics on the market: “Looking ahead, the wide range of potential policy shifts in the U.S. and around the world, coupled with ongoing geopolitical uncertainty, suggest commodities will continue to be an important area of focus for markets and policymakers in 2025.” (Source: The Morning Brew)
The United States is expected to grow faster than other advanced economies, buoyed by tariffs on Chinese goods. Meanwhile, China’s GDP growth is projected to slow to 3.9%, which could temper demand for certain commodities like oil. At the same time, geopolitical conflicts, particularly in the Middle East, could post risks to supply chains.
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Bautis Financial LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.