Among soft commodities, cocoa was the star performer in 2013, with futures prices in both New York and London markets finishing the year 20 percent up on where they began. Cotton futures also closed higher, marking their first yearly gain since 2010. But most other soft commodities finished the year broadly down, largely on account of burgeoning global supplies.
Despite ending the year at a six-week low as investors took profits and arrivals at ports in top growing country, Côte d’Ivoire, picked up pace, cocoa futures in London and New York finished 2013 around 20 percent higher in one of their biggest annual gains in four years.
March cocoa on ICE Futures U.S. futures exchange closed at $2,707.5 a tonne on Dec. 31, and close to $450 a tonne up on where the second-position contract had opened the year. Cocoa for delivery in the same month on London’s NYSE Liffe exchange finished at £1,732 a tonne, marking a similar annual gain to New York cocoa.
Cocoa markets found considerable support in 2013 on concerns about another supply deficit in the current cocoa year, following earlier dry weather conditions in West Africa where around 70 percent of the world’s cocoa is typically produced. Consumption of the main chocolate-making ingredient is also rising.
Firm demand coupled with a smaller crop from the U.S., the world’s biggest cotton exporter, also helped cotton futures prices climb over 12 percent in the past 12 months to record their first annual gain in three years. The U.S. is expected to produce 13.7 million 480-pound bales of cotton in 2013/14, according to the U.S. Department of Agriculture (USDA), which is the lowest output since 2009/10. U.S. production is significantly less than last season (which saw an estimated at 17.32 million bales produced) on account of unfavorable weather conditions and a decrease in planted area.
Cotton for delivery in March on ICE Futures U.S. reached 85.2 cents a pound on Dec. 27, its highest level in two and a half months, boosted by stronger-than-expected U.S. export sales. March cotton finished the year 54 cents off this peak at 84.66 cents.
Prices moved higher despite news from China that the country would soon stop stockpiling cotton. China’s official Xinhua news agency reported Dec. 27 the Chinese government in 2014 intends to start trialling direct subsidies to cotton farmers and halt its stockpiling of domestic cotton program. An end to the stockpiling program, which has helped support global cotton prices during the past three years, has been widely expected by the market.
Raw sugar futures ended the year some 17 percent lower as Brazil and other leading producers such as India and Thailand harvest bumper crops. The bumper crops are adding further to an already oversupplied market which looks set to see a fourth straight year of surplus.
March raw sugar closed Dec. 31 at 16.41 cents a pound on ICE Futures U.S., 55 cents up from the three-year low of 15.86 cents a pound for a front month contract recorded on Dec. 18.
Liffe March refined, or white, sugar, meanwhile, finished 2013 at $449.0 a tonne, some 14 percent down on where it began the year.
Arabica coffee futures in the closing days of the year succumbed once more to the bearish sentiment that has dogged the market for much of the past 12 months and more. Big crops in top growing countries Brazil and Colombia have added to abundant global inventories of the beans. On the final day of 2013, ICE March Arabica futures closed at $1.1070 a pound, a four cents loss on the previous day’s finish and 55 cents off the four-month high of $1.162 a pound recorded on Dec.19. Arabica futures had run up the short-lived rally amid concern about ongoing slow sales of beans by leading robusta producer, Vietnam, but overall, ended 2013 some 26 percent down on the year.
Expectations of rising shipments from Vietnam have also hit robusta prices, with the March Liffe contact finishing 2013 at $1,683 a tonne, down over $130 on the three-and-a-month high of $1,813 a tonne reached on Dec. 13. Robusta futures had been rallying for several weeks on concerns about slow sales by Vietnamese sellers. Low stocks of the beans in NYSE Liffe-approved warehouses, which had fallen to their lowest since at least 2002, had also provided support for the rally.
Vietnam expects to have exported 120,000 tonnes (2 million 60-kg bags) of coffee in December – the second month of the country’s 2013/14 season, according to the General Statistics Office of Vietnam. This is a 26 percent drop on December 2012’s exports of 162,500 tonnes but substantially higher than the 80,000 tonnes exported in November. The statistics office sees Vietnam’s coffee exports in 2013 at 1.29 million tonnes, if realised, represents a decline of 25.7 percent on the prior year.
Many traders and analysts had believed that it would be only a question of time before expectations of higher exports from Vietnam hit robusta’s rally.
U.S. crude ends higher for the year
U.S. oil futures saw a more than 7 percent rise in 2013, with the light, sweet crude West Texas Intermediate contract for February delivery on the New York Mercantile Exchange (Nymex) ending the year at $98.42 a barrel. Last week, February WTI had touched over $100 a barrel for the first time in two months, bolstered by signs of stronger domestic demand and a strengthening U.S. economy. U.S. crude had climbed to its highest in two years in late August amid Western threats of a military response to reports of Syria’s use of chemical weapons and fears that Syria’s conflict could spread. October WTI had touched $112 a barrel by Aug. 28.
U.S. commercial crude inventories – an indicator of sorts of domestic demand – recorded another fall in the week ending Dec. 20, 2013, declining 4.7 million barrels from the previous week, the U.S. government’s Energy Information Administration (EIA reported on Dec. 27. Total U.S. motor gasoline stocks fell 0.6 million barrels while distillate fuel stocks decreased by 1.9 million barrels. Finished gasoline inventories were higher, however, the EIA indicated. The U.S. agency releases its next weekly oil report on Jan. 3.
The international crude benchmark, Brent North Sea crude, saw a marginal overall fall of 0.3 percent in 2013. Brent for delivery in February on London’s ICE Futures Europe exchange finished at $110.80 a barrel, after opening the year at around $111.11 a barrel. Supply disruptions, as well as worries about potential disruptions, helped support Brent crude futures for much of 2013. As with U.S crude futures, Brent had touched a two-year high on ICE Futures Europe in the wake of a U.S.-led threat of a military strike on Syria with Brent crude climbing to over $116 in late August.
Brent crude futures continue to be supported by reduced Libyan output and violence in South Sudan.
Meanwhile, gold futures probably saw one of their worst annual losses in three decades in 2013, as the precious metal’s safe-haven appeal lost its lustre and physical demand for the yellow metal weakened. Gold also has been hammered by the U.S. Federal Reserve’s decision last month to begin cutting its $85-billion-a-month bond-buying program by a monthly $10 billion.
Gold for February delivery settled at $1,202.30 an ounce on Comex division of Nymex on the final day of 2013. Twelve months earlier, February gold finished at over $1,675 an ounce.
While care has been taken to ensure that the information contained in this report is accurate, it is supplied without guarantee. The author can accept no responsibility for any errors or any consequence arising from the information provided.
