Commodity prices mixed, agriculture up last week

Commodity prices followed a mixed trend last week due to political turmoil and geopolitical tensions, with the agricultural sector diverging positively.

South Korea imposed martial law on Dec. 3, which was short-lived as it was unanimously lifted the same night. Additionally, North Korea's defense agreement with Russia officially came into force.

Meanwhile, the French government collapsed following a no-confidence vote, prompting President Emmanuel Macron to accept the resignation of Prime Minister Michel Barnier. However, Macron announced that he would not resign and would instead appoint a new prime minister soon.

Analysts noted that the US dollar gained strength due to positive labor market data and expectations of interest rate cuts. The US Dollar Index climbed to 106.1, further supported by President-elect Donald Trump's announcement of 100% tariffs on BRICS nations in response to their efforts to de-dollarize trade.

The US labor market exhibited mixed signals, with non-farm payrolls increasing by 227,000 in November, surpassing expectations, while the unemployment rate rose to 4.2% from 4.1%. Analysts stated that this increase in employment alleviated concerns about weakening labor demand and reinforced expectations for gradual Federal Reserve rate cuts.

The OPEC group maintained its global economic growth forecast at 3.4% for 2024. Concurrently, China's economy is projected to grow by 4.9% in 2024 and 4.7% in 2025, according to recent data. The People's Bank of China (PBoC) also announced the resumption of gold purchases in November after a six-month hiatus, increasing its reserves from 72.80 million fine troy ounces to 72.96 million.

JP Morgan projected that the average price of gold per ounce would reach $2,950 in 2025, potentially rising to $3,000, driven by a depreciating US dollar and inflationary economic policies. Silver and platinum are also expected to perform strongly in the coming years.

Last week, gold fell 0.7% as the Indian rupee weakened and buyers sold physical gold at discounted prices. In contrast, silver gained 1.1%, while platinum and palladium declined by 1.7% and 2.2%, respectively.

Nickel prices rose 1.7%, following Vale Base Metals' $2.94 billion expansion of its Voisey's Bay mine in northern Labrador. The project transitioned from open-pit to underground mining, boosting nickel concentrate production to 45,000 tons (40,823 metric tons) per year.

Copper prices edged up 0.4%, driven by India's copper demand, which increased 13% year-on-year in 2024, reaching 1,700 kilotons (1.87 million tons), according to the Indian International Copper Association.

The US Treasury imposed sanctions on Russia's Gazprombank, jeopardizing Uzbekistan's $4.8 billion mine expansion project that aims to nearly double copper production.

Zinc prices slipped 0.4% after the UK's Critical Minerals Intelligence Centre added it to its critical minerals list.

In the energy sector, OPEC+ announced a delay in planned production increases, extending current cuts of 2 million barrels per day (bpd) until the end of 2026. Total production by member countries is expected to remain at 39.7 million bpd for 2025 and 2026. Brent crude oil prices rose 1.9% last week, while natural gas prices fell 4.4% amid volatile weather conditions in the US and Europe.

US commercial crude oil stocks increased by 1.2 million barrels last week, contrary to market expectations of a 2-million-barrel decline, according to the American Petroleum Institute. Oilfield services firm Baker Hughes also reported a rise in US oil drilling rigs, with the total reaching 482, up by 5 from the previous week.

In the agricultural sector, wheat prices rose 1.7% after Sovecon revised its estimates for Russian grain and wheat exports for the 2024-2025 fiscal year downward, citing potential reductions in export quotas by the Russian Ministry of Agriculture.

Corn prices increased by 1.6%, while soybeans and rice dropped by 0.5% and 1%, respectively.

Coffee prices experienced sharp declines last week after reaching multi-decade highs in previous weeks. Increased selling by traders in Vietnam and higher export supplies from Brazil contributed to the drop. However, coffee still ended the week with a 3.9% gain.

Cocoa prices surged 4.9% per ton (0.91 metric tons) due to dry weather conditions in West Africa, which are expected to impact the early development of mid-year cocoa crops harvested in April. Seasonal Harmattan winds are forecasted to exacerbate the situation, according to Maxar Technologies.

Meanwhile, sugar prices rose 0.6%, and cotton gained 1.4%.