As the dust settles on 2024, cocoa (CC=F) and coffee (KC=F) have emerged as the biggest winners in the commodities market for the second consecutive year, buoyed by a global supply deficit, while coal lagged behind. With the dawn of 2025, all eyes are now on what the commodities landscape will look like moving forward.

Including commodities in global asset portfolios is crucial for investors, as they offer diversification, act as a hedge against inflation, and help mitigate volatility, according to industry experts.

Commodities are generally divided into two categories: hard and soft. Hard commodities encompass energy and metal products such as aluminium (EDP=F), copper (HG=F), gold (GC=F), nickel (^SPGSIK), silver (SI=F), and platinum (PL=F), while soft commodities typically consist of agricultural goods like wheat (KET=F), cotton (CT=F), cocoa, coffee, sugar (SB=F), and soybeans (ZL=F).

By integrating both hard and soft commodities into their investment strategies, investors can better protect their portfolios from market fluctuations.

For chocolate lovers, the news isn’t sweet. Cocoa prices nearly tripled over the past year, far surpassing the gains of other commodities. By December, cocoa reached a record high of $12,931 per metric ton in New York, driven by concerns over a fourth consecutive season of supply shortages in West Africa, exacerbated by dry weather conditions.

“The softs sector, led by cocoa and coffee, has been the main winner amid adverse weather in key growing regions, highlighting the risk to prices when products like these are produced and sourced from relatively small geographical areas,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Top cocoa producers Ivory Coast and Ghana have suffered crop losses due to a combination of adverse weather, bean disease, smuggling, and reduced plantations being repurposed for illegal gold mining. While hopes remain for a better crop in the 2024/25 season, cocoa prices are expected to stay elevated in the medium term, hovering around the $6,000 per tonne mark once a more balanced market emerges.

These price increases could have wider implications for the chocolate market, with confectionery prices likely to climb in 2025.

“The world cocoa balance for 2024/25 was looking more neutral some months ago until pod counts started to decline slightly across West Africa, and demand projections have also surprised to the upside. Cocoa grindings — a key measure of demand for cocoa — have been much firmer than expected through 2023/24, down just 4% year over year,” Tracey Allen, an agricultural commodities strategist at JP Morgan said.

Coffee, too, experienced a stellar performance in 2024, with prices hitting an all-time high of $349.58 per pound in December. Like cocoa, this surge was driven by adverse weather in key coffee-producing nations such as Vietnam and Brazil.

The global rise in coffee consumption, especially in major markets like China, has further increased demand, placing additional pressure on already strained supply chains.

Meanwhile, precious metals had a strong year, with both gold and silver rising more than 25% in 2024. Analysts predict that these could continue their upward trajectory in 2025, depending largely on US Federal Reserve interest rate cuts and potential shifts in policies under former President Donald Trump.

“Gold is the standout for us in 2025,” ING’s head of commodity research Warren Patterson said, adding that strong gold purchases by central banks will support demand.

Natural gas (NG=F) prices also saw a rally since mid-December 2024, spurred by cold weather and geopolitical factors. The recent halt in Russian gas flows to several European nations on New Year’s Day has introduced further uncertainty into the global gas markets.

As long as the cutoff persists, gas prices are likely to remain elevated, with colder winter weather in the US and Asia potentially prolonging this surge, according to Citi.

In contrast, coal was the worst-performing commodity of 2024, primarily due to slower economic growth in China. The demand for bulk metals also declined as the country’s economy continued to grapple with a property crisis and weak consumer demand.

Oil finished 2024 in the red, with Brent crude (BZ=F) , the international benchmark, closing the year at $74.64 per barrel—down about 3%.

The International Energy Agency painted a bearish outlook for the oil market in 2025, forecasting global oil demand growth of less than one million barrels per day, a stark contrast to the two-million-barrel-per-day rise seen in 2023.

According to the Commonwealth Bank of Australia, Brent oil prices could fall further, with projections pointing to a drop to $70 per barrel in 2025. This decline is expected to be driven by increased oil supply from non-OPEC+ countries, which could outpace global oil consumption.

Copper, a crucial metal for electric vehicle manufacturing and power grid infrastructure, may also face downward pressure after soaring to record highs in 2024 on the back of a global energy transition.

BMI analysts warned that any slowdown in energy transition efforts, potentially linked to policy shifts under Trump’s administration, could dampen the “green sentiment” that had previously supported copper prices.

Global sugar supplies are expected to decline to their lowest level in six years by early 2025, as drought conditions severely impact production in Brazil, the world’s top exporter, according to commodities trader Czarnikow Group. This reduction in supply is likely to place upward pressure on prices.

Geopolitical factors remain a wildcard, as analysts suggest that policies, particularly those related to Iran and Russia, could still alter the supply landscape for key commodities in 2025.

As always, the future of the commodities market will be shaped by a complex interplay of weather patterns, economic growth, and political decisions.

As the year progresses, markets will be watching closely to see which trends dominate in 2025, with cocoa, coffee, and gold on track to repeat last year’s rally.

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