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Commodity Prices React to Cocoa Crisis, Energy Glut, and Trade Tariff Risks

Commodity Prices React to Cocoa Crisis, Energy Glut, and Trade Tariff Risks

Mon, May 26, 2025

Cocoa Supply Shocks and Agricultural Market Upheaval

Agricultural commodities continue to experience sharp volatility, with cocoa leading the headlines. Prices have soared to record highs throughout 2025, triggered by back-to-back poor harvests in West Africa. Ghana, one of the top producers, is grappling with the cocoa swollen shoot virus, devastating yields and causing fears of a long-term supply shortfall. According to Bloomberg, weather anomalies and crop disease have compounded supply-side pressures, keeping traders on edge.

In the meat sector, global demand for chicken is rising as consumers shift toward cheaper protein sources. This trend is driven in part by persistently high beef prices. However, new outbreaks of avian flu in Brazil, a key exporter, have cast uncertainty over poultry exports. These disruptions are reinforcing price instability across agricultural categories and prompting governments to review food security policies.

Oil Builds Inventory, Gold Hits Record as Investors Seek Safety

In energy markets, oil prices have rebounded modestly with Brent crude trading around $65 and WTI near $62 per barrel. The bounce follows U.S. President Trump’s decision to extend trade negotiations with the European Union, a move seen as temporarily defusing tensions that could have impacted energy demand. However, as noted by Reuters, land and offshore oil inventories are rising rapidly, raising red flags about a possible supply glut. The International Energy Agency has also revised down oil demand growth projections, reflecting the global economic slowdown and the accelerating shift toward electric vehicles.

Precious metals are gaining favor among investors navigating this uncertainty. Gold futures climbed above $3,360 per troy ounce, driven by escalating trade threats and concerns about a potential U.S. credit downgrade. Analysts anticipate further gains as economic headwinds persist, with silver also presenting upside potential for value-focused investors.

Meanwhile, industrial metals are facing headwinds. U.S. tariffs on aluminum and steel imports have softened demand, dragging down aluminum prices. Copper also fell sharply last month, as weak Chinese export orders and sluggish U.S. growth cast a pall over industrial activity.

Looking Ahead: Trade Barriers and Strategic Materials in Focus

Geopolitical risks remain a major wildcard for commodity investors. President Trump’s threat to impose a 50% tariff on European goods rattled Gulf stock markets and sparked a defensive tilt toward haven assets. Compounding this, China’s latest export licensing rules on seven rare earth elements have drawn attention to the fragile nature of supply chains tied to green energy and defense technology. As reported by the Financial Times, such regulatory changes could have long-term ramifications for critical mineral access.

In the near term, market watchers expect further volatility as economic, environmental, and geopolitical forces continue to collide. Diversification and close monitoring of sector-specific risks will be crucial strategies for investors navigating these turbulent waters.