RIO DE JANEIRO, BRAZIL – For all the talk of a commodities boom, some markets have now wiped out gains for the year and several more are close to doing so.
Soybean futures have erased their advance recorded this year, dropping over 20% from the 8-year high reached in May. Corn and wheat also tumbled.
On Thursday, June 17, the Bloomberg Grains Spot Subindex suffered its biggest tumble since 2009, but recovered some losses on Friday. Platinum’s positive balance also vanished. Nickel, sugar, and even lumber reversed bullish moves.
The fact that some markets are falling while others – including oil and tin – sustain gains, underscores how unevenly the complex is responding to economies reopening and expanding once again.
While these commodities have advanced due to strong demand fundamentals, others face very specific headwinds, such as easing concerns over soybean supplies and uncertainty surrounding monetary policy in the case of gold and silver.
Some commodities have been shaken this week by the signaling of interest rate hikes by the U.S. Federal Reserve, the stronger dollar, and China’s measures to contain inflation.
The Asian country has warned that it will release metals stored in state reserves in time to bring prices back to normal, intensifying efforts to hold down the appreciation of commodities.
“Risk-off is front and center thanks to the hawkish words from the Fed, which came on the back of the Chinese government-led directives over prior weeks,” said Michael Cuoco, head of hedge-fund sales for metals and bulk materials at StoneX Group. “Central-bank stimulus helped the markets gather steam in the spring of 2020, and now there is a bit of a macro reset.”
Even some of the markets that clearly benefit from the reopening are pulling back. Copper is about to close its worst week in more than a year.
A big drop in many commodities and seasonality accounts for some of the recent slump as futures contracts roll over, while improving weather is hurting prices of many agricultural products.