2010: A Banner Year for Commodities

2010 marked a momentous year for commodities. Copper, gold, and cattle made all-time highs, while numerous other markets had considerable rallies, taking prices sharply higher in 2010.

The rallies in commodities have been supported across the board by China's voracious demand for natural resources as that nation rapidly develops, buying copper, cotton, lumber, crude oil and soybeans.

Commodity prices also rose on U.S. inflation fears, which were exacerbated by the Federal Reserve's November announcement that it would be injecting $600 billion into the bond markets to energize the U.S. markets.

Despite a bin-busting U.S. grain harvest this year, other major producers, including Brazil, Russia, Canada and Australia had poor harvests, which crippled global grain output. Low supplies coupled with increased demand from Asia for livestock feed and a resurgence of U.S. demand for soy- and corn-based biofuels, causing the grain markets to surge higher during the last six months of the year. From their mid-summer lows, the grains rallies spectacularly, with corn rising 93% to $6.25 per bushel, soybeans grinding 50% higher to $13.85 and wheat emerging as the leader, up 90% to $8.06.

Although the Eurocurrency was notably weaker this year, other foreign currencies like the Australian Dollar, Brazilian Real, and the Swiss Franc all gained against the U.S. Dollar as investors placed their money in countries with strong economies and exposure to commodities. During the year, the Australian Dollar rose 25% to $1.01, the Brazilian Real rose 12% to $0.59 and the Swiss Franc rose 25% to $1.07.

In the final days of 2010, silver and sugar made new 30-year highs at $30.93 per ounce and 34.35 cents per pound, respectively. Most traders expect 2011 to be another year of excitement in the commodities markets as they react to a recovering global economy, continued European debt concerns, growing demand for commodities from Asia, and ever-changing climate conditions.

We wish you all a happy New Year and a prosperous 2011!