EUR 441.86 For Business Accounts Only

Softs In-Depth Report June-July

​The markets had their run to the upside this past quarter stoked by concerns that 2016-17 would see a continuation of the deficits that occurred in 2015-16. The lingering effects of El Niño were largely to blame for significant stock reductions and the gap between production and use may be too big to close for the season ahead even with improving weather. The recovery in the markets was more than just the weather. Helping to prod the markets even higher was an inflow of capital back to commodities. Oil prices rallied. The Brazilian real strengthened. Interest rates are remaining low and that is creating a surge of money to be invested in emerging markets. It appears the cycle has now come full circle. If money is flowing into emerging markets once again, then consumption is likely to strengthen as these economies start to lift up. The light switch for commodities is turned back on; it may not be a steady green just yet but could easily gain momentum. Investors desire compelling stories and the one of putting your money into this bread basket worked before and will lure capital back into the markets once again. There is a greater chance of upward mobility and increased spending when money pours into developing nations, especially on food and furnishings. Capacity building will occur. Raw materials will be needed. Even Brazil is starting to see some positive economic indicators with the dark clouds starting to blow away. All roads still point to China and there also a gleam of hope this path is starting to shine again. Commodities are coming back into vogue. This does not mean that there will not be setbacks and with improving weather and dollar strength, the markets may move in waves, ebbing back and forth for an undefined period of time, but the underpinning should be evident with a more upbeat bias than a year ago.