The Economist Intelligence Unit Commodities Outlook suggests that after three turbulent years, commodities prices are ready for a more steady trajectory in 2024.
The global economy is facing a number of geopolitical obstacles, including unfavourable weather, Middle East wars, and disruptions to shipping lanes via the Suez and Panama canals.
However, the outlook is for a year of relative stability.
The apparent calm, however, masks the underlying volatility expected in the short term, with markets experiencing fluctuations before longer-term trends, particularly those associated with the green transition, take centre stage.
In contrast, the outlook for food, feedstuffs, and beverages is less sanguine, with prices anticipated to rise throughout 2024.
The primary driver behind this increase is the impact of El Niño on production, particularly for beverages such as coffee and cocoa.
The US National Oceanic and Atmospheric Administration (NOAA) predicts a 72% chance that El Niño will subside by mid-year, offering some relief.
Nevertheless, the damage to the current season’s harvests is already projected, with coffee and cocoa production expected to decline by 9% and 13%, respectively, in the 2023/24 crop season.
Adding to concerns, the permanent withdrawal of Russia from the Black Sea Grain Initiative poses an additional upside risk to global food prices, notably affecting wheat, maize, and oilseeds.
Despite this, the impact on prices has been limited thus far, as Ukraine successfully navigates alternative road and rail routes through its western borders to export grains and oilseeds.
Ukraine’s grain exports, initially disrupted after the collapse of the grain deal last summer, have rebounded following the establishment of a temporary shipping corridor through the western Black Sea, facilitated by Romania and Bulgaria.