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Wheat and soybeans posted the highest gains and coffee the biggest loss while gold’s rally stretched to a 12th year as commodities ended 2012 focused on the US fiscal crisis after riding through a blistering drought and Europe’s debt debacle.
Oil rose for a fourth straight year since the 2008 financial crisis, setting a record annual average price above $111 a barrel. But annual gains from oil — and copper — were modest as a weak global economy weighed on a strong couple of quarters for the two industrial commodities.
The Thomson Reuters-Jefferies CRB index, a widely followed commodities indicator, finished flat on the day but down for a second year — losing more than 3 percent - despite 13 winners among the 19 mostly US-traded markets on its list.
Three of the CRB’s components posted double-digit gains: Chicago-traded wheat leading with 19 per cent, followed by soybeans and natural gas. Four markets, all agricultural-based, had double-digit losses, with New York-traded arabica coffee falling nearly 40 per cent and orange juice just over 30 percent.
Analysts and traders said they were optimistic of a surge in commodity investments in the new year after President Barack Obama announced on Monday that the White House and its rival Republicans in Congress were close to a deal on the US “fiscal cliff”.
Most commodities staged a last-gasp rally on news of the potential deal to avert some $600 billion in tax increases and spending cuts in 2013 that could otherwise send the US economy into another recession.
“I think we’ll see a rally in copper prices in the first quarter and I wouldn’t be surprised to see new money hitting commodities early next year as it is still a good investment,”
said Randy North, director at RBC Capital Markets.
Money managers said investors seem willing to take more risks in 2013 in hopes of greater rewards after spending most of this year in a defensive crouch.
Recent US data showed contracts for US home resales hit a 2-1/2-year high in November and factory activity in the Midwest expanded in December, suggesting some strength in the economy.
Wheat prices surged after poor crop weather in major exporters from Russia to Argentina created supply tensions. Aside from its 19 per cent gain in Chicago, wheat was up 27 per cent in Paris.
US wheat ended the day down, near a six-month low at $7.78 a bushel. French milling wheat settled close to a five-month bottom at 248 euros ($330) a tonne.
The outlook for wheat remains strong, with the US crop for next year’s harvest suffering from a lack of moisture and appearing vulnerable to frost damage this winter. Demand is also steady after the recent pullback in Chicago prices.
Soybeans had similar gains to wheat, finishing up nearly 18 per cent for the year, but closing down for the day at $14.18-3/4 a bushel in Chicago.