The latest trends in commodities: Cocoa, OJ and gold all testing all-time highs

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Over the past 12 months, uranium, cocoa, orange juice and gold have all neared 10-year highs – or, in some cases, set new ones. Let’s take a look at what’s driving prices of these commodities.

First, have you noticed your holiday chocolates are more expensive? The price of cocoa is approaching US$4,100 a tonne and is at a record high.

According to Statista, 70 per cent of the world’s cocoa beans come from four West African countries: Ivory Coast, Ghana, Nigeria and Cameroon, with Ivory Coast and Ghana accounting for more than 50 per cent of the world’s cocoa. Ivory Coast is the world’s largest producer, and its shipments as of Oct. 1 are down 30 per cent from this time last year. The reason for the decline is the spread of black pod disease and swollen shoot virus, which are severely affecting crop yields. Ghana, the world’s second-largest producer, is also experiencing reduced shipments because of black pod disease.

Uranium surpassed US$80 a pound this month, thanks to low inventories and projections for increasing demand, supported by China’s plans to add 25 more reactors by 2030. The spot price of uranium started rising in earnest this year as a result of the Russian invasion of Ukraine. Ukraine and other European countries depend on uranium from the Commonwealth of Independent States (CIS), which includes Russia, Kazakhstan and Uzbekistan. After the conflict began in 2022, European countries quickly looked for new sources of uranium. As demand increased, prices rose, and the demand for longer-term contracts increased, which put pressure on inventories.

Gold continues to trade on the basis of safe-haven demand and elevated U.S. Treasury yields. The metal currently sits at a six-month high above US$2,000, not far off its all-time high set in August of 2020, at US$2,072. Expectations for rate cuts from central banks continue but are being scaled back over concerns about persistent inflation. Current Fed fund futures are projecting cuts in May, July and November of 2024, taking the Fed’s key rate down to 4.50 per cent to 4.75 per cent from the current level of 5.25 per cent to 5.5 per cent. Gold historically performs best in a falling rate environment.

Orange juice prices have almost doubled since the start of 2023 and are up four times from their low in 2019. Orange juice futures reached an all-time high of US$431.95 in October of 2023. (Price is per 15,000 pounds of frozen orange juice concentrate.) Like cocoa, oranges have been hit with a combination of bad weather and disease – a bacteria known as citrus greening causes the oranges to be green, misshapen, bitter and unsuitable for sale even as juice. Florida production numbers for the 2023-24 season are expected to come in at 20.5 million boxes of oranges, up from 15.8 million last year but down considerably from previous years.

In the past month, the price of copper has started to rebound as news from China seems to be indicating a bottoming in its economy. China’s third-quarter GDP data beat expectations at 4.9 per cent. and Beijing announced a plan to issue an additional one trillion yuan ($191-billion) of sovereign debt to support reconstruction of areas hit hard by natural disasters.

Lumber prices continue to hold in the upper range of US$450-$550 per thousand board feet. Sawmills are doing a better job of managing production schedules and we see it here with tight supplies in what is usually a slow period for the industry. That, along with mortgage rates levelling off and the acknowledgment of an undersupplied housing market, is underpinning the support for lumber prices. According to Madison’s Lumber Reporter, housing starts in the United States are in the 1.3-million to 1.4-million-unit range but need to be 1.5 million to 1.6 million units to fill the housing gap.

Lithium carbonate prices have been falling again after a brief reprieve in early summer. Lithium mine development continues globally with a projected supply of lithium going from a current level of 850,000 tonnes in 2023 to over 2.3 million tonnes by 2030. Demand on the other hand is currently at 750,000 tonnes but projected to exceed 3.1 million tonnes by 2030. There is an inflection point expected as soon as 2025, when demand will again exceed supply.

Brian Donovan, CBV, is the president of StockCalc, a Canadian fintech based in Miramichi, N.B.

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