Cocoa Among Top Commodity Gainers In 2018
Cocoa prices ended 2018 with strong gains, leading generally firmer agricultural markets, but the year marked falls for most major commodities, as increasing global economic uncertainty hit metals and oil.
Worries about slackening growth in China, the world's second-largest economy, and trade talks between Washington and Beijing will be the main focus in the new year, analysts said, while oil markets fear a growing oversupply.
"We had a dramatic decline in the crude-oil market, as global supplies are rising, not just [in] the United States, but also [in] Saudi Arabia and Russia," said Phin Ziebell, a senior economist at National Australia Bank who covers agriculture and the oil and gas markets.
"[However,] agriculture markets, cocoa, and wheat, in particular, have had a strong performance, which has been driven by fundamentals," Ziebell added.
London cocoa prices climbed almost 30% in 2018, recovering from six-year lows, as dry weather in top producer Ivory Coast boosted speculative fund inflows, although supply is now picking up.
Wheat is also set for a positive finish, up around 20%, on expectations of strong demand for US cargoes, as the rival Black Sea region runs of out of supplies. Soybeans, though, have been hit by the US-China trade war.
In grain markets, Chicago wheat futures gained by almost a fifth – rising for a second year in a row, after several years in the doldrums – and were boosted by hopes of higher demand for US cargoes in the first half of 2019.
Surplus wheat supplies are dwindling in the world's biggest exporter, Russia, after strong sales since July, while Australia – typically the number-four exporter – is suffering from a second year of drought.
The Washington-Beijing trade war has dragged down US soybean prices, as China, which buys 60% of the oilseed traded worldwide, took mainly Brazilian cargoes for much of 2018.
This is expected to result in large unsold stocks in the United States, although recent signs of improving trade relations between the two countries could support prices.
Malaysian palm oil futures, however, fell about 15% in 2018 due to a glut, while Tokyo rubber dropped nearly 18% on China growth worries.