A slightly weaker dollar index and a rally in the long-term bond prices did not support most commodities in February. The March dollar index moved 0.61% lower, while the May U.S. 30-year Treasury bond futures were 3.92% higher at 118-13 during the second month of 2025. Gold and copper were higher, while silver, platinum, and palladium futures declined. Crude oil, oil products, ethanol, and Rotterdam coal prices dropped, while natural gas moved nearly 25% higher.
Corn, soybean, and wheat futures fell. Sugar and coffee were higher, while the prices of cocoa, cotton, and FCOJ fell, with the OJ falling over 35%. Animal proteins were lower. Lumber prices moved higher.
The only double-digit percentage gain was in natural gas, while FCOJ, cocoa, platinum, palladium, Rotterdam coal, cocoa, Bitcoin, and Ethereum posted double-digit percentage losses for the month ending on Friday, February 28.
Natural gas prices explode higher
Natural gas was the best-performing commodity in February, posting a nearly 25% gain.
The monthly chart highlights that U.S. natural gas futures for April delivery rallied from $3.07 at the end of January to $3.834 per MMBtu at the end of February. The other fossil fuel futures and ethanol did not move higher, with Rotterdam coal leading the way on the downside with an over 16% decline. Crude oil and oil products declined, while crack spreads were on either side of unchanged, with a small loss in the gasoline refining spread and a gain in the distillate crack spread.
Gold and coffee futures reach new record highs before correcting
Gold futures rose to a new nominal record high in February when the continuous futures contract reached $2,974 per ounce.
The monthly chart shows gold reaching its record peak before correcting. Meanwhile, silver declined by 3.3% while platinum and palladium fell over 10% and 15%, respectively. COMEX copper futures rose 5.25% in February. The precious metals and copper reflected tariff concerns during the month.
ICE Arabica coffee futures were the other commodity that reached a new record peak in February. The quarterly chart shows the explosive rally that took Arabica coffee to nearly $4.30 per pound, almost $1 above the 1977 $3.3750 per pound record peak. Coffee corrected after reaching an all-time high but finished the month with a marginal gain. World sugar futures moved over 3.5% higher, while cocoa dropped over 15%, and cotton futures fell 2.67%.
Grains were lower, with losses in corn, soybean, and CBOT wheat futures. Lean hog futures led the meats lower with an over 7% decline, while live and feeder cattle futures moved lower.
FCOJ plunged
FCOJ futures reached a record $5.4315 per pound high in December 2024.
The monthly chart illustrates the significant 35.39% drop in February, taking FCOJ futures to just over $3 per pound on February 28, leading the soft commodities and all commodities on the downside.
The beginning of the 2025 planting season in the Northern Hemisphere- Seasonality in energy and meats
March is the beginning of spring, meaning that the 2025 planting season in grain and oilseed markets is on the horizon. Farmers will begin planting crops over the coming weeks. Corn, soybean, and wheat prices have declined to levels that could attract buying as the uncertainty of the weather conditions during the 2025 crop year may ignite volatility.
Natural gas will move into the injection season after a cold winter, but stocks have dropped to levels that could hold prices steady.
The latest EIA data from shows that U.S. natural gas stocks have declined to 23.4% below last year’s level and 11.5% under the five-year average for late February. Increasing demand for U.S. LNG and inventory levels could keep a bid under natural gas as the energy commodity heads for the off-demand season. Crude oil’s path of least resistance will depend on geopolitical events, but the 2025 driving season begins in the spring, which could cause increasing demand.
Meanwhile, the 2025 grilling season begins in late May when beef and pork demand tend to increase. Prices tend to peak during the spring and summer.
Factors to watch in March 2025
March tends to come in like a lion and go out like a lamb, which could cause some seasonal volatility in commodity markets. However, three factors will likely cause the most significant price variance over the coming weeks.
- The wars in Ukraine and the Middle East could cause bouts of volatility.
- U.S. policies under the Trump administration could cause market turmoil. Tariffs are trade barriers that impact global raw material prices, creating distortions that lead to sudden price moves.
- The Chinese economy remains critical as China is the demand side of the equation for many commodity markets.
Volatility in commodities can create many trading opportunities. Approach markets with a risk-reward plan and stick to the program. Accepting small losses in the quest for oversized gains is always acceptable. Therefore, stick to loss levels when markets move contrary to expectations, but adjust risk-reward dynamics to protect capital and gains when markets move in the desired direction.
Expect continued volatility in the commodities asset class in March and beyond, and you will not be surprised or disappointed.
