Raw materials are coming back into favor, but not all of them. Cocoa is more expensive than copper

The arrival of "spring" can be observed on the commodity market, after the "winter" we observed last year. However, the increases are selective - prices are rising oil, gold i copper, and grain prices remain low. This year, 10 percent. Polish investors plan to increase their investments in raw materials.

Cocoa is more expensive than copper

After a poor year for raw materials in 2023, the recovery on this market is progressing slowly and selectively. Oil prices have exceeded USD 90, gold is reaching new highs, and copper is also gaining strength. Additionally, cocoa prices it is still around 10. dollars per ton. However, prices of most other agricultural products remain low, although prices increased slightly in March after 7 months of continuous declines.

In the case of many raw materials, we have a good, although not great, market prospect. We are experiencing a simultaneous increase in demand and falling supply, which results in higher prices. In the case of oil, OPEC+ has cut supplies by 5,5%, and at the same time there are disruptions caused by weather. This is happening at a time when over the last 15 years, expenditure on the increase in production has been limited by low prices and ESG factors. On the other hand, demand for oil remains underestimated, economic growth in the US is still around 3%, and we also see signs of recovery in production in China. Most recently US Energy Information Agency raised its oil demand forecasts.

Cereals on the defensive

On the other hand, the supply of grain on world markets remains high. Prices wheat i corn halved from their 2022 peak following Russia's invasion of Ukraine. While soybean prices have fallen more than the broad commodity index, these three commodities are near their three-year price lows. The downward pressure on their prices was exerted by the rising dollar and excess supply caused by good harvests in South America and Russia. This has also been a major factor in lower food prices around the world, as they account for 1/3 of calories consumed globally. This is a relief for consumers and inflation-focused policymakers. However, this puts pressure on farmers and their suppliers, as we can see after agricultural protests in Poland and Europe. However, the situation on the agricultural raw material market may be slowly improving - in March, the FAO Food Price Index increased by 1,1%. This is the first such increase after 7 months of continuous declines in agricultural product prices. However, it is not cereals that are responsible for the price increase, but vegetable oil, dairy products and meat.

In the near future, the situation on the raw materials market will be influenced by several factors. The geopolitical risk premium has returned to the oil market. High risk in the international arena is also responsible for the increase in gold prices. The decline in inflation in the US increases the demand for raw materials as a form of protection against inflation (it is worth remembering that gold does not protect against inflation in PLN). Although yesterday's inflation reading for March in the US turned out to be significantly higher than forecast, which shows that inflation has not had its last word yet. Finally, the poor performance of commodities in 2023 and the extremely poor long-term performance compared to technology stocks has a contrarian positive connotation for many investors.

According to the study eToro Individual Investor Pulse 10 percent Polish investors plan to increase their investments in raw materials this year. While globally 8% are planning such a move. investors, commodities rank behind cryptocurrencies, stocks and cash, but ahead of local bonds, currencies and alternative investments.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.