Why you might want to consider investing in ‘soft’ commodities

Coffee beans
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Stay home and drink coffee

Soft commodities are commodities that can theoretically be produced indefinitely, as opposed to gold and oil, of which there is a limited supply. Here I’m specifically referring to assets such as coffee, cotton, and sugar — products we use in our everyday lives. Till the winter of 2020, these assets used to be relatively cheap overall. However, since the arrival of the COVID pandemic, the prices of all three listed above have skyrocketed. More than two years after the outburst, prices continue rising, albeit in a more subtle manner. The markets for these products are thriving, which may mean good opportunities for us investors.

Sugar exportation
Photo by Shutterstock

Return of the risk appetite

Another reason for optimism for investors in soft commodities is the constant decrease in the value of the US Dollar, compared to other currencies. That is great news for the soft commodities investors since they are traditionally priced in USD. I expect the prices of soft commodities to continue surging unless something truly unexpected occurs. What is happening to the Dollar? Let me give you a brief explanation related to our topic.

COVID-19 and the Dollar
Photo by Shutterstock

New safe havens

The last two years have turned our lives over, and so is true about the economy. Although some countries’ economies have already started showing signs of recovery, the effects of the pandemic are still present and are highly influential. Assets that used to be stable and reliable, such as the Dollar and gold, are losing stability, while assets that were once taken for granted are empowered by the forces of the pandemic-affected fast-changing market.



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