January 5, 2021 | by elpidios
Long before we had markets controlled by currencies, stocks, indices and cryptocurrencies, commodities ruled the world. To a certain extent, they still do: commodities fuel our vehicles, build our homes, provide us with nourishment, and keep us both dressed and pepped up at the office.
Obviously, given their importance, commodities are actively traded in the global markets. Throughout history, these products’ prices have fluctuated as a result of changing social, political, technological and economic conditions, allowing plenty of smart investors to make some money trading in these markets.
However, don’t be fooled. Not all commodities are created equal since some of them take the lion’s share of the trades. So, to make things easier for you, we’ve compiled a nifty list including the top 15 most actively traded commodities for 2020, in no particular order and COVID-19 not included.
Without oil, we probably couldn’t heat our home during these cold winter months, let alone sit here and read this article on our computers. Who do you think we are? The Flintstones?
The two most traded crude oils available to investors are Brent and West Texas Intermediate (WTI), both of which are used as reference prices for those trading in oil.
Other benchmark crudes include Dubai Crude, Urals Oil, Bonny Light, Isthmus and the OPEC Reference Basket (ORB).
Following what has been a highly volatile year for oil prices, 2021 foresees a bit more stability for the market. Remember that Brent kicked off 2020 at about $64 per barrel only to see its price drop to $9 per barrel at the outset of the COVID-19 pandemic.
Things got so bad for oil that WTI’s price on one infamous day in April dropped to -$37 per barrel, meaning that producers were willing to actually pay people (with large storage rooms, basements or backyards) to take barrels of oil off their hands.
After this calamitous drop, prices rose with both Brent and WTI settling in at between $48 and $52 per barrel in December. Analysts believe oil prices for 2021 will remain stable, hovering just below the $50-per-barrel mark.
Our precious has staged a strong comeback in 2020, increasing in value by almost 24 percent when compared to 2019. After starting the year at $1,520 per ounce and climbing up to $2,060, gold is expected to close the year at just under $1,900.
Several factors linked to COVID-19 contributed to this spike.
Gold’s position as a safe-haven asset saw a boost as a result of all the uncertainty and economic hardship wrought on the world by the pandemic.
Additionally, in an effort to jumpstart their economies, governments throughout the world softened their monetary policies, reducing their interest rates to promote consumption and investment and implemented enormous rescue packages to resist a potential recession. Gold, of course, stepped in as a safeguard against inflationary pressures.
Gold’s less flashy sibling, silver, has also experienced plenty of success in 2020.
For the year, silver has increased in value by close to 45 percent, benefiting from those same conditions that helped boost the price of gold throughout the year.
Silver’s value is also expected to rise in 2021 as supply might be scarce considering the temporary closures in 2020 in many of the main silver-producing nations.
Shutdowns in China, Peru and Mexico, which all account for more than 50 percent of global silver production, could potentially lead to a 6.3 percent decline in available silver and drive prices even further up, with some pundits even saying it will surpass the $30-per-ounce mark.
Following in gold and silver’s footsteps, copper also gained plenty of notoriety in 2020.
The metal, which is widely used by construction and other heavy industries, is hoping for an even stronger 2021 as the various COVID-19 vaccines make their way through the globe and business goes back to usual.
In 2020, after hitting a year low of $2.1 per tonne in April, copper climbed its way up à la Fausto Coppi at the Giro d’Italia. Copper is expected to close the year at $3.56 per tonne, marking a 27.25 percent hike from where it had started the year.
Did you know that more than 50 percent of the world’s vegetable oil comes from soybeans? Yes, we’d be hard pressed to find fish and chips, Nashville-style hot chicken and deep fried Mars bars (yes, Google it) if it weren’t for this East Asian legume and its genetic variant.
Besides this fun fact, most of its production (about 85%) is destined to animal feed, supporting mankind’s undying craving for meat.
Not unlike its metallic commodity buddies, soybeans also benefited from the ongoing global pandemic with prices soaring by 33 percent since the beginning of the year.
Soybean demand is at an all time high with people throughout the world embracing soy-based health products (tofu burgers anyone?) and the legume making plenty of inroads in the pharmaceutical, dietetics, biomaterials and health and beauty sectors.
While the world might see a short decline in supply as a result of the many lockdowns, closures and supply chain delays, in the long term, the soybean market is expected to be quite robust.
As crude oil’s odorless and transparent cousin, natural gas’ price fluctuated quite dramatically during 2020, delivering only a small gain come December.
After hitting a 25-year low in the spring of 2020 following the many disruptions caused by the coronavirus crisis, Henry Hub natural gas (which is traded in NYMEX) recovered and closed the year at around the $2.3 MMBtu mark.
Prognostications for 2021 show that prices will remain steady and potentially rise above $3 MMBtu. The US’s Energy Information Agency believes a rising demand for space heating and an increase in the country’s exports of liquefied natural gas (LNG) will drive prices up.
What would mornings be like without a cup of joe? Unbearable, right?
Well, coffee is one of the world’s most actively traded commodities and 2020, if we had to guess, was an excellent year for the world’s favorite drink.
Nope. We were wrong. Prices were as confused as someone trying to order a venti, skim, no whip, iced, pumpkin spice latte at Starbucks for the first time.
Coffee prices opened the year at $1.15 per pound and oscillated between $0.94 and $1.34 to close out the year at around the $1.26 mark. That means coffee in 2020 traded within a 40 percent range, a quite volatile setting that offered traders plenty of opportunities to turn a profit.
In 2021, the price of this soft commodity can move in either direction.
As the world moves forward with its COVID-19 vaccination campaign, business might return to normal, boosting the demand for coffee as people start going out and spending money at their local cafés.
However, fears of lower supply coming from Brazil as a result of adverse weather conditions and additional quarantines until vaccination is widespread lead other analysts to believe that coffee prices will ultimately remain weak.
Wheat makes the world go ‘round. If you don’t believe this, you’ve never had a Neapolitan pizza.
Following a dip to $4.75 per bushel in June, the price of wheat recovered and made it up to about $6.30 in December, closing out 2020 with a 12.2 percent gain from the start of the year.
Like with soybeans, analysts believe prices will continue to surge in 2021 as countries stockpile wheat (and other agro commodities) due to COVID-19 and dry weather conditions lead to poorer-than-expected harvests. Prices are only expected to dip by the summer of 2021.
Believe it or not, sugar is one of the most traded commodities in the world.
Sugar prices collapsed in the middle of 2020, hitting a low of $0.09 per pound, but recovered in December and hit the year’s starting price of $0.15. This increase was powered by a drop in the price of ethanol, which pushed producers to make sugar instead of the less profitable fuel.
Given the decrease in demand for sugar due to the coronavirus, prices in 2021 are not expected to increase and might even drop from their current levels.
In a pattern that somewhat mimics that experienced by sugar, the price of corn witnessed a dip from its 2020 starting price of $3.88 per bushel to spike towards the end of the year and hover around the $4.50 mark.
Thanks to increased demand for corn as animal feed in China and lower supplies throughout the world, the price of corn could hit $5,00 per bushel in 2021. Supply will depend on weather conditions in corn-producing countries such as Brazil and Argentina and whether they can manage to grow and harvest corn twice during next year’s growing season.
It might be time to start saving for your Corn Flakes and tortilla chips.
Steel is considered one of the preeminent building materials and trading commodities worldwide. Steel trading, which is focused in the Shanghai Futures Exchange and London Metal Exchange, involves a wide array of steel products including scrap steel, hot-rolled coil steel and steel rebar.
Prices in 2020 witnessed a significant fourth quarter spike with, for example, one month contracts for LME steel rebar and steel scrap hitting $596 and $426.5 by the end of December, respectively. This spike is largely attributed to growing Chinese demand for steel as its economy recovers following the COVID-19 pandemic.
Overall, while demand for steel dropped in 2020, this is expected to increase in 2021 and hit pre-coronavirus levels by 2022. Prices, as a result, will move upwards before stabilizing by the middle of 2021, so there might be some trade opportunities at the turn of the year.
Iron ore has had one hell of a year. Tony Stark would have doubled his number of suits by now if he had traded in his favorite commodity.
For those of you wondering, iron ore is the raw material used to make pig iron, which in turn is used to make steel. From this, one can deduce that iron is probably just as important as crude oil or (*cough, cough*) coffee.
Propelled by China’s strong performance producing steel and global supply shortages, iron ore prices increased by close to 70 percent, rising in value from $93.41 per tonne in January to close to $163 in December.
However, not all is rosy as analysts believe these prices are not sustainable and will drop during the next four years.
Still, growing supply from China and an increase in demand coming from steel-making factories in southeast Asia might propel prices further up. Additionally, adverse weather conditions at the beginning of 2021 in both Brazil and Australia might lead to supply disruptions and higher prices for this raw material.
Talk about roller coasters and just look at aluminium’s price chart for 2020. Nice ride, no?
From April to June 2020, the price of aluminium fell about 17.5 percent below its starting point of $1,820.7. Then, however, the light, ultra flexible metal twisted and turned its way out of the hole, climbing to just above $2,000 to (foil) wrap up the year.
Prices in 2021 are expected to settle down once China’s demand for the material levels out and demand elsewhere across the globe picks up. Keep in mind that China became a net importer of aluminium in 2020 spurred by its economic recovery following the COVID-19 pandemic and the excess surplus available elsewhere.
Cotton, responsible for the world’s favorite fabric (take that polyester!), also experienced a bumpy ride in 2020. Prices started the year at around $0,70 per pound, only to fall to below $0,50 at the height of COVID-19’s first wave. Things picked up after that with the commodity recovering and settling in at just above $0,75 by the end of the year.
Cotton’s price outlook for 2021 is difficult to define. Many factors have converged and make it tough to predict whether it’s time to buy or sell this commodity.
Lower production as a result of a stoppage in mill use has been countered by historically high global stocks of cotton.
Furthermore, retail spaces have shut down due to the ongoing pandemic, but more and more consumers have embraced online shopping to cover their needs and stave off boredom. All of this, of course, would end up being moot if vaccine programs worldwide ramp up and prove to be effective.
Finally, the US has placed a ban on products made by XPCC, a Chinese company that is responsible for one-third of all cotton grown there. This sanction also applies to third parties using textiles produced by XPCC, which opens the possibility of China retaliating against the US and negatively impacting the price of this commodity.
You should always leave the yummiest for last. Unless you are into sniffing gasoline. Cocoa, or the cure to heartbreak, rounds out our list.
The raw material to make chocolate has had an unpredictable year with its price experiencing more peaks and valleys than Switzerland. Seriously, it’s price chart looks like a Toblerone, fluctuating wildly between $1,510 and $2,012 per metric tonne.
Despite it being one of the smallest agro-commodities that is widely traded, its impact on the global food, sweets and retail market can be quite large. Plus, it’s a highly volatile commodity with prices riding crests and troughs throughout its trading history, opening up plenty of opportunities for traders willing to take the risk.
It’s hard to determine how cocoa prices will trend in 2021. Besides its natural volatility, many factors affect its price, including climactic and political conditions in Ivory Coast and Ghana, countries responsible for two-thirds of global production; demand from the confectionary, food and cosmetics industries, and; the world’s sweet tooth during a pandemic, among others.
Are there any other commodities you like to trade and would like to see featured in future blog posts? If so, let us know and we’ll break them down for you.
To check out a list of all of our ongoing promotions and offers, have a look at our website HERE.
*Any opinions, news, research, analyses, prices or other information contained here are provided as general market commentary and do not constitute investment advice. FXPRIMUS does not accept liability for any loss or damage, including without limitation to, any loss of proﬁt, which may arise directly or indirectly from the use of or reliance on such information.