Commodities Shine in 2009

Strong rallies mark the end of 2009

PETALINGJAYA: Strong rallies in key commodities globally marked the end of 2009, which proved to be a fantastic year for most soft and hard commodities in the aftermath of the global financial crisis in 2008.

Gold, the investment darling of commodities in 2009, soared more than 60% to hit an all-time high of US$1,226.56 an ounce on Dec 3 amid the weakening US dollar, while crude oil surged about 110% to reach a record US$79.55 a barrel, the biggest annual gain in a decade.

Volatile rallies were also seen in food-related commodities like corn, wheat, rice, vegetable oils such as soybean and crude palm oil (CPO) mostly induced by inflationary fears.

On the local front, star performer CPO rose over 50% in 2009 to close above RM2,600 per tonne yesterday, after falling about 44% in 2008. The benchmark CPO contract for March closed at RM2,663 per tonne, a far cry compared with the bottom price of about RM1,400 in early 2008.

Strong demand from China and India, the world’s biggest edible oil consumers, as well as supply tightness in soybean in 2009, also saw CPO prices more than double over the last decade.

Additionally, bullish crude oil prices in 2009 also helped boost the price of CPO, an alternative feedstock for biofuel.

According to a recent report by JP Morgan’s commodity research team, higher crude oil prices provide further catalyst for CPO price to remain stronger than expected.

It noted that CPO prices would likely be the strongest in the first half of 2010 and could possibly spike up to RM2,600 to RM2,800 per tonne given the tight supply of palm oil and soyoil as well as the current wide discount between palm oil and soyoil.

“If this absolute discount of US$240 per tonne narrows to its 10-year historical average of US$163 per tonne, CPO prices could trend up to RM2,650.

“The narrowest discount is about 10% before substitution to soyoil takes place, which translates to a CPO price of RM2,880,” it added.

Despite tremendous pressure on the issue of sustainability and environment from non-governmental organisations (NGOs) and Western consuming nations, palm oil – the world’s most tradeable oil – trail-blazed through 2009 succintly.

Source : The Star by Hanim Adnan

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