2015: A Year of Commodity Volatility

As the year ends, we want to take a look back at the record-breaking commodity moves and the events that drove them during 2015.

Energy Markets Melt

New drilling technologies over the past few years allowed the US to rapidly expand oil and natural gas production, making it the largest producer of hydrocarbons in the world, outpacing Russia and Saudi Arabia.

Rising production and stagnant demand caused inventories of natural gas and crude oil to expand to record high levels. These huge inventories drove natural gas to a 16-year low earlier this month under $1.70 per million BTUs, while crude oil declined to six-year low under $35 per barrel.

These price declines have been ruinous for some US energy production companies as well as foreign governments that depend on fossil fuel revenue, like Saudi Arabia, Russia, and Brazil, pushing them into economic turmoil.

Meanwhile, the low prices are a welcome benefit to consumers who are enjoying gasoline under $2 per gallon and will likely have cheap heating bills this winter.

Agriculture in a Slump

Ample harvests of corn, wheat, and soybeans worldwide pushed prices into new low ground this year.

Hog herds rebounded after being devastated by a virus in 2014; larger pork supply led prices to drop near 50 cents per pound, the lowest price in six years. Similarly, after reaching record high prices in late 2014, the cattle market fell back to earth as farmers expanded their cattle herds.

Eggs were one of the few bull markets in the agricultural sector, reaching 30-year highs after an avian flu outbreak led to over 30 million egg-laying hens being killed off.

As a result of these swings, most consumers should expect lower prices at the grocery store, while agricultural producers will be working harder for less pay.

Dollar Reigns Supreme

The United States' economic recovery continued plugging along in 2015, with unemployment falling to 5% and the housing market continuing to rise. This emboldened the Federal Reserve to raise interest rates by 0.25% in December, breaking seven years of near-zero rates.

Meanwhile, Europe and many of our other trading partners continue to struggle, which has forced them to increase stimulus measures in order to shore up their flagging economies.

As a result, the US dollar has been gaining favor among global currency traders, pushing the US dollar to a 12-year high value, as measured by the US Dollar Index.

For Americans, this means that they can buy cheaper foreign goods and travel for less. Unfortunately, a strong dollar also makes it harder for US companies to export their goods to our relatively poorer trading partners.