Worldwide wheat inventories are expected to rise 19% this year, which is the largest annual increase since 2002 according to the USDA. This will put pressure on a variety of soft commodities this year. Which pushed us to issue a reminder:
Never forget that in the long-term, soft commodities should become cheaper and cheaper. That’s because human technology advances mean that farms will become more efficient. This has obviously already been the case, humans can now produce far more wheat, corn, etc. with far less effort than in the past. While we may all feel we know this, sometimes we may forget what this implies for soft commodities’ prices.
Soft commodities are in a permanent long-term downtrend since technology is in a permanent long-term uptrend. Obviously traders can make money every day both long and short, but never forget that the wind of progress is against you in softs.