Agricultural and soft commodities refer to commodities that are grown rather than mined or drilled. Sugar, coffee, wheat and rice account for a large proportion of diet in developed and emerging markets alike.
As the global population continues to increase in size and wealth there are strong implications on agricultural and soft commodities. Firstly, expanding cities automatically imply decreasing workable land for farming, which in turn means there will be less commodities grown and less supply coming to market. As populations increase there are not only more mouths to feed, but as wealth increases, diet move towards meat based diet, which is less efficient use of the arable land.
Trends in the energy market also impact on softs as ethanol and bio-fuels threaten to become a realistic alternative to fuels derived from crude oil.