Softs

Global ag markets will become more volatile as anthropogenically induced climate change continues to degrade farmland. This will make price signals emanating from these markets less efficient in terms of processing supply-demand fundamentals. All else equal, food prices likely move higher, which will contribute to inflationary biases in the medium-to-long run. Investors will continue to seek out farmland investments as a way to diversify portfolio risk and raise absolute returns.

Commodity volatility will continue its rising trend since 2014. The US is on the brink of a major election, the outcome of which could reduce its willingness to engage with the outside world. So, states seeking to carve out their own spheres of influence are incentivized to raise the economic costs to the US and discourage its influence in their regions. These states can do this by interfering in key trading routes in their regions. As a result, geopolitical threats to maritime chokepoints are a structural as well as cyclical problem and will persist due to the revival of superpower competition.

President Biden is facing foreign challenges on three fronts and these challenges are coalescing around the critical states of the Midwest. Take risks off the table and stay defensive in 2024.