The Softs Will Rise Again

A majority of the soft commodities, the label applied to the basket of commodities including cocoa, sugar, coffee, orange juice and cotton, have exhibited a significant increase in price since the start of the year. The futures rally has been the most significant in the cocoa and sugar markets, with both seeing a 20 percent-or-better increase in total price since the first of the year and cocoa trading to all-time highs of $6,039 per metric ton this week.

Orange juice, which had previously topped at an all-time high of $4.32 per pound back in November and then fell to $3 per pound in January, has now recovered back to touch the $4-per-pound mark just last week.

Cotton, which has been one of the least volatile commodities since the end of 2022, has also seen its front month futures increase by 15 percent or better since the start of the year, with the March futures hitting $0.95 per pound.

The coffee market doesn’t quite fit the same narrative, but the front month futures are near the same price today that they were on Jan. 2, with March Coffee Futures trading near $1.90 per pound.

Soft commodities are also sometimes referred to as the "tropical" commodities, which could explain part of the connection as adverse weather has been a known component of the high prices for both OJ and cocoa. It is still very rare to see the entire basket of softs trade in tandem as they have for the past month-and-a-half. This is in sharp contrast to grains, the other side of the grown commodities, with corn, soybeans and wheat all dropping sharply in price since the start of the year.

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