Market Drivers in 2015

As traders and investors returned to work after the New Year's Holiday, they began pondering the big questions for 2015. When will the Federal Reserve raise interest rates? Will turmoil in Eastern Europe and the Middle East stabilize or worsen? Low energy prices reigned in 2014, but can they stay low? This week, we take a look at these major issues and how they'll affect commodities.

Rates to Rise

Since 2009, the Federal Reserve has held interest rates near zero in an effort to boost the economy by lowering borrowing costs. As the economy has strengthened, there have been increasing calls for the Fed to raise rates, and the majority of its committee members expect to raise rates by late 2015.

Aside from the direct impact on bond futures markets, a rise in rates would also make loans more expensive for grain, livestock, energy and metals producers and stockpilers, which could restrict future supplies of many commodities.

Global Crises Worsen

2014 marked another year of turmoil with the ongoing Syrian Civil War, resurgence of terrorist threats in Iraq from ISIS, and Russian aggression against Ukraine.

The United States military has largely avoided direct intervention in these conflicts, due to political resistance, budget pressures, and shifting focus towards Asia. Going forward, many analysts expect that reducing US military presence could result in more regional conflicts, which could interrupt the flow of commodities onto the global marketplace.

Furthermore, the ongoing Ebola epidemic in West Africa remains largely contained to Sierra Leone, Liberia and Guinea, but could spread, adding to global uncertainty.

Energy's Slide Lower

The collapse in natural gas, crude oil, and their products has been a boon for end users who are heavy users of the fuels, like copper miners. Agricultural producers also burn a lot of fuel, but are equally dependent on fossil-fuel based products like pesticides and fertilizers. Cheaper input costs have allowed these producers to enjoy higher levels of profit, but a rise in energy costs could crimp their production in the future.

For the time being, crude oil and natural gas have continued falling to fresh multiyear lows, with crude trading Friday for $53 per barrel and natural gas under $3.00 per million BTUs.