It’s been an eventful year for commodities, but for many it has ended on a subdued note. Crude oil, which peaked in July at nearly $78 a barrel, has edged back above $60 – but was undermined this week by Opec’s latest report, suggesting that the weakening US economy would dampen demand in 2007. Gold, at a 26-year high of $730 an ounce in early May, has failed to hold above $650 on subsequent rallies. Overall, the Reuters/Jefferies CRB index is down around 15% from its May peak, but that number disguises some spectacular performances, such as the 155% rise in nickel prices, and strong gains from many soft commodities.
So what should investors look for in 2007? Commodities guru Jim Rogers, who last week repeated his prediction that the bull market would continue until at least 2014, says that investors should focus their attentions on agriculture. “Wheat, soya, corn, orange juice are all far below their all-time highs,” he says. His bullishness on corn is widely shared, thanks to growing demand for grain ethanol. “Five years from now, we will look back and identify 2006 as the year that the world woke up to the emergence of ethanol as a significant fuel,” says Todd Hultman of DailyFutures.com.
The outlook for metals next year is more muddy; even Rogers is less than bullish on copper, pointing out that supply is set to rise, even as the US slowdown hits demand. But there is one metal that seems almost certain to outperform, says Sean Brodrick on MoneyandMarkets.com; one where there was a 42-million-pound shortfall this year. “You want to bet on one commodity in 2007? Make it uranium.”