Not sure if you are aware of butter products’ shortages in Europe lately, but because of very high demand and reduced supply prices are surging. It feels that financial experts are too busy calling a top in stocks and are missing, in my mind, one of the biggest macro stories of the next couple of years.
What if we start seeing something similar in other softs and agricultures? What if prices of other food products start surging too? I think this could have some serious effects on the real economy.
I will let other people discuss potential effects, but let me rather focus on where prices might go and what you could do about it.
I published a post about unloved soft commodities already. A lot of the arguments I presented are still very much or even more valid than then. Thus I won’t go into too much details again. I invite an interested reader to give it a read here.
I exposed cocoa back then and I still think it is the most ready of all softs mentioned in the post to surge higher in price. Since the post in July the price continued to form a nice bottoming base structure, but this Friday broke decisively above its trend line resistance and 200 day SMA.
I wouldn’t be surprised if on a long run the price doubles from here, but more shorter term targets could be set at around 2800 level.
If you don’t have a commodity futures trading account, no need to create one straight away. One could easily play this with one of the ETF’s available, for example $NIB iPath Bloomberg Cocoa Subindex ETF or a more general one $DBA PowerShares DB Agriculture ETF although one should be careful with the latter as it is in a down trend still.