Written by Brenda Nakalema

Commodities enjoyed huge gains across the board in 2021. With the exception of Gold

Commodities in 2021 were anything but calm, with surprise fluctuations that had even the most jaded veterans shook. The prices …

Commodities in 2021 were anything but calm, with surprise fluctuations that had even the most jaded veterans shook. The prices of wheat, coffee, sugar, lumber and energy all soared. The most interesting aspect of these price hikes is that they weren’t all caused by the same factors. Despite the general upward trend, though, Gold, whose performance marched in the opposite direction, left many investors puzzled.

The doubling in coffee prices this year would doubtless have caused shock and disappointment for all coffee lovers whose day doesn’t begin without a delicious cup. In Brazil, much of the crop was detroyed when a blast of unfavourable weather hit the country. “It was a terrible drought, then a triple frost,” says the President of Hackett Financial Advisors, Shawn Hackett. The beginning of the year had prices of Arabica beans at around $1.25 a pound, reaching a high of about $2.50 in early December, a level last witnessed in 2011, according to data from Trading Economics. Recently coffee fetched $2.25.

In the same light, sugar prices rose on the back of poor Brazilian growing conditions, resulting in price hikes from 15.8 cents a pound in January to an excess of 20 cents November, the highest level since early 2017.

According to Hackett, the high demand for fuel ethanol and the huge rebound meant that more sugar was fermented.

Crude prices also experienced massive rallies as demand exceeded supply. The increasing need to step away from traditional fuel sources by both politicians and investors was partially the cause behind the supply deficit. “The producers are under pressure socially from regulators and economically,” he says. “They are being cautious about new exploration.” Brent crude rose to $87 a barrel from $51 in early January.

European gas prices jumped more than sevenfold to a recent record high of 180 euros ($205) a megawatt-hour from 20 euros in early January.

According to Gilbertie, the lack of sufficient alternative energy sources to avert the use of hydrocarbons lead to a surge in demand and increase in price.

Vital growing areas such as Russia, Canada and the U.S took a toll on the spring wheat crop. Prices overall surged from $6.40 a bushel in early January to $ 8.50 recently. Russia also went ahead and imposed export taxes on wheat to keep local prices down. While the strategy kept Russian grain at the right level, it sent global prices soaring.

Lumber prices also rallied to an all-time high with prices soaring at $1,600 per thousand board feet. A marked increase from $878 at the start of the year. The increase in prices left the construction industry in shock and came as increased demand for nonurban houses ran headlong into supply constraints. Lumber mills also struggled to increase production amidst labour shortages.

Finally, the most surprising commodities move in 2021 was the move that didn’t happen: Gold. The bullion price opened the year at around $1,944 a troy ounce but recently fell back to $1,785. Despite the surging consumer inflation, the slump occurred, which jumped to an annualized 6.8% in November, from 1.4% in January.

According to Juan Carlos Artigas, the Head of Reasearch at the World Gold Council, Gold prices are a reflcetio of the worries about future inflation and changes in the cost of borrowing money.