The end of 2023 is only days away. Commodity production is regional, with production from countries with significant reserves of ores and energy and fertile soil and weather conditions supporting crop growth. I monitor six commodity sectors that contain the most liquid raw material futures contracts. While four of the six sectors will finish 2023 on the downside, fundamental and technical factors pushed some prices higher since the end of 2022. As of December 22, the top performing commodities for the year were in the soft commodities sector as illiquid frozen concentrated orange juice and cocoa futures soared.
Gold leads the precious metals- Copper is the top base metal
As of December 22, 2023, gold and silver were higher than the 2022 closing level, while platinum, palladium, and rhodium prices were lower. Silver was only around 1.3% higher, while gold posted a double-digit percentage gain.
The chart highlights gold’s rally that took the continuous contract to $2,070.70 per ounce on December 26, 13.8% higher than the $1,819.70 closing price at the end of 2022. Gold reached a new record high in December 2023. While higher interest rates weighed in precious metals, geopolitical turmoil supported gold.
Base metals suffered from rising interest rates in 2023, sending aluminum, nickel, lead, and zinc prices lower on the London Metals Exchange. Nickel fell the most, with a loss od over 40% for the year, and zinc posted a double-digit percentage loss, galling over 13%. While LME copper and tin prices were between 1% and 2% higher as of December 22, COMEX copper futures posted the most significant yearly increase.
The chart shows the nominal gain in COMEX copper futures, which increased by nearly 3% in 2023. Copper is a critical ingredient in climate change initiatives, and a deficit in the copper market supports the price of the red metal’s despite the negative interest rate environment.
Oats lead the bearish grain sector
Grain prices moved primarily lower in 2023, with double-digit percentage losses in CBOT soybeans, soybean meal, soybean oil, corn, CBOT, KCBT, and MGE wheat. Rice was lower, while oats were the only grain posting a marginal gain in 2023.
As the chart highlights, oat futures lost just under 1% in 2023 as of December 26. Ample supplies pushed gain prices lower despite the ongoing war in Europe’s breadbasket.
Energy was ugly, but crude oil is the top performer despite a losing year
Energy commodities posted across-the-board losses in 2023 as of December 22, 2023. Gasoline, heating oil, natural gas, ethanol, and Rotterdam coal futures posted double-digit percentage losses. ICE Brent and NYMEX WTI crude oil futures did the best, with under 10% losses, but both were between 5% and 6% lower than the level at the end of last year.
The chart illustrates at $81.51 per barrel, Brent futures led the sector with a 5.1% loss in 2023 with a little under a week to go until the end of the year. Economic weakness in China weighed on energy commodities.
FCOJ and cocoa lead softs- Cattle prices rally
Soft commodities were a bright spot in 2023, with only ICE cotton futures prices moving over 5% lower as of December 26. World sugar futures were up just below 2.6% for the year. Coffee, cocoa, and FCOJ prices soared in 2023. With under one week to go in 2023, coffee futures were over 15% higher, while cocoa futures gained nearly 65%.
As the chart shows, cocoa futures soared, leading the soft commodities sector in 2023. Meanwhile, frozen concentrated orange juice futures were nearly 60% higher after pulling back from a record $4.3195 per pound high. Weather conditions in Florida and Brazil created shortages, pushing orange prices to record levels.
Live and feeder cattle futures prices rose in the animal protein sector while lean hogs declined. With less than one week to go, live cattle futures were just under 7.4% higher, while the hogs fell over 20.5%.
The chart highlights the over 21% rise in the feeder cattle futures. Cattle were high as production costs increased. The feeders led as corn prices declined. Hogs fell because of seasonal factors after the 2023 grilling season ended in early fall.
Gold, oil, copper, and lumber- Industrial commodities tell a story
Meanwhile, physical lumber futures were nearly 11% higher as of December 22.
The chart shows the double-digit percentage rise in wood prices. The prospects for lower mortgage rates in 2024 pushed lumber prices higher.
Gold led the precious metals sector, and while crude oil prices fell, petroleum was the best-performing energy commodity. Copper prices outpaced the other base metals, and lumber prices moved higher. Gold is an economic barometer, a hybrid between a financial indicator and a commodity. Oil, copper, and lumber are leading industrial indicators. The 2023 performance could be a precursor for higher commodity prices in 2024.
The Fed’s pivot to a more accommodative monetary policy approach and the recent declines in the U.S. dollar index are positive signs for the commodities asset class for the coming year.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
