Oil and gasoline are the two main sources of fuel within the energy market, with transportation being a major fuel guzzler. The more the global population rises, the more fuel is needed to keep cars and planes running. The BRIC economies, made up of Brazil, Russia, India, and China are four of the biggest oil and gasoline consumers on the planet.
Between January and June, oil providers in the Northern Hemisphere stockpile their supply in order to cope with the spike in demand come the summer. This is because people all over the world fly and drive to holiday locations, which all require fuel. If the supply chain is disrupted during the summer, it can impact the volatility of the oil and gas market. The same thing happens during winter stockpiling, if there are delays or disruptions to deliveries due to snowstorms etc. As soon as the supply unexpectedly drops, the prices spike.
Heating oil is the second biggest product of crude oil, behind gasoline. That is why it is often referred to as No. 2 oil. Between June and October, heating oil is stockpiled in preparation for the winter months, when it is needed most. However, if there is a disruption in the supply chain, it can cause volatility in the market and heating oil prices to spike.
Wheat is the most important grain on the planet because we use it in so much of our food. With the global population rising year-on-year, wheat becomes more and more pivotal. In the spring and summer, wheat is harvested in the US, meaning the supply is at its peak. The higher the supply, the lower the prices. We see far more volatility in the wheat market come the winter planting season, which often happens in September. If it gets planted late, there is a risk it may not survive. If it gets planted early, there is a risk of disease in the dry soil. With such a small margin of error, there is plenty of volatility in the wheat market during this time. If the projected supply is low, then prices will spike.
Corn is the most important grain on the planet when it comes to feeding animals. As such, it is a pivotal part of the human food supply chain. We grow corn grain, we feed it to cattle, and then we eat the cattle. Corn grain is also an ingredient used to make ethanol, which is used in things like corn syrup and gasoline.
Corn prices usually decrease between summer and the harvest season because so much grain floods the market in September/October/November. The prices are at their lowest between December and February when supply is at its highest. However, volatility can be seen between April and August when the corn grain is planted/grown. Once again, there is a low margin for error and anything that damages the eventual supply results in a price spike. Corn grain prices are usually at their peak in June and July.
Copper is the third most-used metal in the world behind iron and aluminium. It is a vital component of the machinery and construction industries, which makes it generally important to the economy of the world. However copper mining can be influenced by politics as mining operations are government-controlled.
Aluminium is one of the most-used metals in the world. Because it does not corrode and is so lightweight, it has become a popular packaging material, and it even has a place in the aerospace industry. The transportation industry uses 30% of the aluminium supply in the United States, with 20% going to cans/containers, and 10% to construction.
Gold is one of the most popular precious metals on the planet, especially when it comes to gift-giving and investment. India is one of the largest consumers of gold in the world, while regulation changes have seen a popularity rise in China recently too. In fact, the growth of the Chinese middle class is expected to prompt a 100 per cent increase in gold demand across China in the next decade. Since 2010, the demand for gold in China has risen by 70%, with jewellery being the main contributor to that increase. Because gold holds value so well, it is often seen as a reliable investment amid a volatile global economy.
Gift-giving occasions often result in jewellery spikes. For example, Christmas, Thanksgiving, Valentine’s and Indian Festivals all see a whole lot of gifts exchanging hands. Jewellery is also a popular option, so producers stockpile between June and November in order to cope with the high demand in December, January and February. The higher the demand, the higher the prices.
Silver is a common component of tableware, artefacts, jewellery and more – and has been used for thousands of years. However, it used to be a lot easier to find and mine near the Earth’s surface back then.
The silver dollar was introduced into United States circulation in 1792, which meant that the economy directly related to the relationship between silver and gold. It was only in 1965 that the US finally decided to remove silver as a currency material. In the year 2000, America decided to focus on using silver as a raw industrial material instead. Thanks to this important role in US industry, silver remains a solid investment option.
The largest providers of silver across the globe are America, Mexico and Peru. There are also secondary silver providers who melt the material down from scraps and coins. Secondary silver is more price-sensitive than primary silver sources.
Silver is a popular choice in modern investment portfolios and risks in price can be managed using futures and options contracts.
As the name suggests, the platinum metal group is headline by platinum itself, alongside the likes of rhodium, iridium, palladium, osmium, and ruthenium. These metals are all important as industrial materials. Despite this jewellery is the main platinum user at 51%, with 29% of the world’s supply going to automotive catalysts, 13% to petroleum refining catalysts, and 7% to high-tech electronics. Platinum is among the rarest metals on the planet. While there are 547 million ounces of silver mined each year, there are only 5 million troy ounces of platinum secured. 80 per cent of the world’s platinum comes from South Africa, with Russia and North America providing 11% and 6% respectively. Such a low supply but high demand means platinum prices are very volatile.
Saying that coffee is popular is an understatement. More than 400 billion cups of the stuff are consumed across the world every year. The major providers of coffee beans are Brazil, Vietnam and Colombia, with one-third coming from the former.
While this is fantastic for the Brazilian economy, having such a large percentage of a popular resource coming from a single country means that any disruptions to Brazil can have a big impact. A typhoon in Brazil can cause a ripple effect that ends in a coffee bean price hike, for example. Prices are usually highest between November and May in preparation for the frost season in Brazil.
If it’s Robusta coffee you want, then the major global provider is Vietnam. This is used to create instant coffee and is harvested between October and January. That means any weather disruption during this time can cause volatility in the instant coffee market.
The time of year can also play a part, as coffee is consumed more during winter months in the Northern Hemisphere. If any disruptions impact the supply during this time, then prices may spike.
Sugar
The modern world has a sweet tooth, and sugar is a key ingredient in so many things, from cakes to fizzy drinks. The demand for sugar only increases during festivities such as
Christmas, Easter, Thanksgiving, and Jewish holidays when sweet gifts are exchanged. Sugar prices are usually highest in December around Christmas.
The biggest provider of sugar in the world is Brazil. For seven months of the year, they flood the market with sugar, before taking a break between December and April. Sugar crops grown in Europe are not grown for Christmas, and the demand often peaks in Autumn in the Northern Hemisphere. Any disruption in the build-up to a major event like Christmas can cause prices to spike.
The supply and demand of different animals/meats changes throughout the season. Beef is often more popular during warm months when barbeques are common. Cattle flood the market between July and September, bringing a whole lot of beef with them. Come October time, there is often still a lot left on the market, making for low prices due to lower demand. Steak is usually more in demand during the spring and summer. The supply of meat in general slows between March and May due to the farm birth cycles. Prices can be more volatile as stockpiling begins ahead of a busy spring/summer. Meat prices can also be impacted by corn grain, which is used to feed the animals.
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