A stronger dollar index and falling long-term bond prices weighed on most commodities in December. The March dollar index rose 2.68%, while the March U.S. 30-year Treasury bond futures declined 4.81% during the final month of 2024. Precious metals and copper posted across-the-board declines, while crude oil and oil products moved higher. Natural gas rallied over 13% higher on the prospects for cold weather and increased demand, while coal for delivery in Rotterdam dropped more than 5.8%. Corn rallied, while CBOT soybean and wheat futures edged marginally higher. Sugar and cotton prices fell, while coffee rose and reached a new record high before correcting. Cocoa prices rose to a new all-time high and were nearly 24% higher, while FCOJ posted an over 2.26% increase. Cotton moved lower to the 68.40 cents per pound level. Lumber prices dropped.
Live and feeder cattle futures rallied, while the lean hog futures declined.
The S&P 500 moved lower, the dollar moved higher, and cryptocurrencies corrected to the downside.
December’s price action in commodities was as follows:
Bitcoin took out the $100,000 level before correcting below the milestone by the end of the month.
Cocoa all commodities- New highs for coffee futures
Soft commodities have been bullish beasts in 2023 and 2024. In December 2024, cocoa and coffee prices rose to new record highs.
The monthly cocoa chart for March 2025 delivery highlights the rally from $9,425 at the end of November to $11,675 per ton at the end of December. Cocoa reached a new record peak of $12,931 in December 2024.
Meanwhile, coffee futures roared to a new record high in December.
The quarterly Arabica coffee futures chart for March delivery illustrates a new record $3.4835 per pound peak in December, surpassing the previous 1977 $3.3750 high.
Meanwhile, FCOJ traded on either side of the $5 per pound level, while sugar and cotton futures lagged, posting declines for 2024’s final month.
Natural gas experiences a seasonal rally
Cold weather forecasts during the early peak heating demand season caused a late December rally in the natural gas futures arena.
The daily chart illustrates the rally in February natural gas futures from $3.204 at the end of November to $4.201 per MMBtu on December 30. Natural gas prices tend to reach seasonal highs during early winter, and late 2024 was no exception to the seasonal trading pattern.
Metals under pressure- Oil moved higher- Cryptos correct
Gold, silver, platinum, palladium, and copper prices declined in December. A strong U.S. dollar and higher long-term interest rates weighed on the precious and leading base metal.
The daily chart shows the 2.68% rise in the nearby March dollar index futures in December.
Meanwhile, the daily chart of the U.S. 30-year Treasury bond futures highlights the 4.76% decline. A strong dollar weighs on metals prices because it causes them to rise in other currency terms, encouraging selling. Rising interest rates are bearish for metals because they increase the cost of financing inventories, encouraging consumers to purchase on a hand-to-mouth basis instead of storing the metals.
Crude oil and oil product prices moved higher in December, with the WTI petroleum at $71.72 per barrel level. OPEC+ extended production cuts, citing weak Chinese energy demand and increasing production from non-cartel producers. Coal fell, while ethanol swaps moved higher. Gasoline and heating oil prices moved higher with crude oil, and crack spreads posted gains, as the products outperformed the petroleum.
Bitcoin and Ethereum prices moved lower in December. After trading above the $100,000 level to a new $108,226.65 high on December 17, the leading cryptocurrency ran out of upside steam and fell below the $93,300 level. Ethereum also declined, but support for cryptos from the incoming Trump administration is not bearish for the sector going into 2025.
Lumber could be in the buy zone if rates decline
Illiquid physical lumber futures fell by over 6% in December.
The daily chart illustrates the decline from $638.50 in mid-November to $580.50 per 1,000 board feet at the end of 2024. Lumber futures dropped as long-term interest and mortgage rates remained stubbornly high. Moreover, winter is the off-season for construction demand. Lower rates in 2025, tariffs on Canada, and increased building under the incoming Trump administration could make lumber inexpensive at below $600 per 1,000 board feet. Moreover, wood prices tend to experience seasonal highs during spring, which could be a buying opportunity at the current price level.
A new administration could cause lots of market volatility
Elections have consequences. On January 20, President-elect Trump and his administration will move into the White House, marking a dramatic shift in U.S. foreign and domestic policies. Markets reflect the economic and geopolitical landscapes, which will change. We have seen political changes sweeping across the globe since the U.S. election. The following issues will factor into the path of least resistance of markets across all asset classes in early 2025:
- Domestic policy
- Tariffs
- Wars and geopolitical tensions
- Foreign relations with friends and foes
- Unforeseen events
Time will tell if inflationary pressures remain above the Fed’s 2% level and interest rates remain stubbornly high, which tends to be bearish for many raw material prices. In the agricultural sector, the weather and crop diseases will be critical factors in the path of least resistance of grains, oilseeds, soft commodities, and animal proteins. The long-term bull market in stocks continues, but the bond market could limit upside potential as fixed-income returns could cause capital to flow from stocks to bonds.
Follow those trends but be flexible. The world remains volatile, and many changes on the horizon after the new U.S. administration moves into the White House on January 20. Careful attention to risk-reward dynamics is a prerequisite for success in trading or investing.
