The saga of Donald Trump defeating Hilary Clinton in the U.S. election wins the award for Commodity Story of the Year. Although President-elect Trump’s policies, cabinet appointments, and doctrine have yet to be finalized, we can predict potential massive changes which will impact commodity production, consumption, imports, exports, and the financial markets. These changes may delight or frighten investors, farmers, business owners, and speculators.
On the domestic side, his energy and environmental policies should have wide-ranging impacts on gas and oil markets. It is expected that he will ease regulations on the production of natural gas and crude oil and its products, while diminishing the role of ethanol and biodiesel, which could hurt the corn and soybean markets that have become dependent on biofuel demand.
His promise to stimulate manufacturing and infrastructure could increase demand for base metals such as steel, zinc, and copper.
On the international front, Trump’s attitude toward trade could have immediate impact on agricultural prices, petroleum, and currency valuations as the U.S. adjusts its relationships with major international players like the EU, China, Russia, and Mexico.
Futures Break All Records
Election-related uncertainty, rising interest rates, and volatile international events from Brexit to OPEC cutting oil output led to a record-breaking year for futures trading. During the year, the price of oil doubled, stock market futures rebounded to all-time highs, and agricultural products mostly declined as a result of oversupply. These moves led a record number of people to trade futures contracts as a way to mitigate financial risks, such as volatile stock indices or falling crop prices.
Open interest, the number of outstanding contracts traded by investors, hit an all-time high during December, peaking at 120.7 million.
This rising activity has been taking place almost exclusively on computers as the famous and flamboyant “trading pits” in Chicago and New York lose participants.
On December 30th, the CME Group will officially close the last of the remaining old-fashioned pits in New York, fully turning to electronic trading, which was born in Chicago in 1987. Precious market information that was once held in the hands of a few privileged “locals” is now delivered in moments to market participants world-wide by a simple click of the mouse.