Why trade or invest in soft commodities
Commodities represent the fastest growing markets worldwide and the global demand for the tropical softs is surging. Often undervalued and overlooked, these markets hold tremendous opportunity for traders and investors alike.
Why understand soft commodities even if you do not trade or invest in them
Oftentimes with tremendous inherent price volatility, these markets provide huge opportunities for trading. Understanding the key fundamental factors that drive the markets can significantly increase profits by improving entry and exit points with a clearer view of what the market's upside and downside potential are. These markets have distinct seasonal and cyclical patterns that are best appreciated from a fundamental perspective.
Because commodities tend to have lower or even negative correlation with equities, many financial advisors are recommending that their clients include an allocation of commodities to help diversify their traditional portfolios of equities, fixed income and cash.
Soft commodities are leading indicators for the broader markets, global economic activity, and U.S. currency valuation. Understanding the fundamentals of these markets is critical to understanding capital market behavior, both present and future. If you trade or invest in other asset classes, understanding soft commodities can provide you valuable insight into these markets.