Outrageous Predictions
Executive Summary: Outrageous Predictions 2026
Saxo Group
Read Saxo's Outrageous Predictions for 2026, our latest batch of low probability, but high impact ev...
You can access both of our platforms from a single Saxo account.
Agriculture: Growing divide between softs and grains
Ole Hansen
Head of Commodity Strategy
Summary: The extraordinary temperatures seen this year, partly due to El Niño as it continues to develop in the equatorial Pacific, has created a very volatile year across the agriculture sector. Some areas have been hurt by high temperatures and drought while others have been impacted by too much rain, but overall a clear trend has emerged with the southern hemisphere suffering a bigger disruption than the northern, and it helps explain a widening gap this year between the performance of soft commodities - such as cocoa, coffee, cotton, and sugar on one hand, and the grain and soy sector on the other.
Global Market Quick Take: Europe
Commitment of Traders: Near record gold buying drives risk of a correction
Commodities: Special edition podcast with WisdomTree
Key points in this update:
- A volatile weather year has created a sharp performance gap between grains and softs
- El Niño is growing in strength raising concerns for the Southern Hemisphere crop season
- Gains in softs being led by orange juice, cocoa and sugar
“October temperature record broken as 2023 ‘near certain’ to be warmest year” was the headline in this recent article which sited data from the EU’s climate monitor. The extraordinary temperatures seen this year have partly been due to El Niño as it continues to develop in the equatorial Pacific. A weather phenomenon, explained by NOAA here, which tends to bring rain to South America and droughts to Australia and parts of Asia, and the result has been a widening gap this year between the performance of soft commodities - such as cocoa, coffee, cotton, and sugar on one hand, and the grain and soy sector on the other.
The softs sector is so far showing a 32% year-to-date gain, while the grains sector has fallen by 14%. Despite weather scares early in the growing season and concerns about Ukraine, a bumper crop has emerged following a strong growing season across the northern hemisphere. Lower wheat, corn and soybean prices have done a great deal to reduce inflationary pressures around the world, but dark clouds may still emerge into the southern hemisphere production season with hot temperatures in Australia and too much rain in parts of South America highlighting the different impact of El Niño which may grow in strength in the coming months.
The softs sector has experienced a much more challenging year so far with many of the products being produced across regions from West Africa to India and Thailand which have been exposed to extreme temperatures and with that loss of water and production. Examples being cocoa which trades near a 44-year high with this season’s Ivory Coast port arrivals remaining well below last season’s pace while sugar has reached a 12-year high, driven by port congestions in Brazil at time where India’s crop has been hurt by dryness, leading to export restrictions from the world’s second largest shipper. Furthermore, lack of rain in October due to continued impacts of El Niño could signal the country’s production problems will extend for a second season, limiting supplies through 2025.
The sharp divide between grains and soy contracts and the softs are on clear display in the below performance table, and while the overall impact on the global economy and consumers remain relatively low given price movements so far in key stables such as rice and wheat, the risk to production from rising temperatures across the world, leading to water shortages and more volatile growing conditions can unfortunately not be ruled out.
Frozen orange juice futures top the table below after reaching a record high last month above $4 per pound, more than 3X the average price seen before 2022 when orange groves were damaged by Hurricane Ian. In addition, more consistent damage has been caused by the citrus greening disease, resulting in the USDA forecasting a production of 20.5 million boxes in the 2023/24 marketing year, down from 41.2 million boxes produced in 2021/22.
Agriculture-related companies in the S&P Commodity Producers Agribusiness Index which is tracked by the iShares Agribusiness UCITS ETF trades down around 15% on the year, and by coincidence in line with the loss seen in the above-mentioned grains index. While an investment in food commodities risks amplifying the risk of even higher prices, an investment in companies involved with the sector can instead be part of the solution, as the industry tries to optimise production methods in order to address the growing threat of climate change.
Latest Market Insights
Outrageous Predictions 2026
-
-
Outrageous Predictions
A Fortune 500 company names an AI model as CEO
Charu Chanana
Chief Investment Strategist
Can AI be trusted to take over in the boardroom? With the right algorithms and balanced human oversi... -
Outrageous Predictions
Despite concerns, U.S. 2026 mid-term elections proceed smoothly
John J. Hardy
Global Head of Macro Strategy
In spite of outstanding threats to the American democratic process, the US midterms come and go cord... -
Outrageous Predictions
Dollar dominance challenged by Beijing’s golden yuan
Charu Chanana
Chief Investment Strategist
Beijing does an end-run around the US dollar, setting up a framework for settling trade in a neutral... -
Outrageous Predictions
Obesity drugs for everyone – even for pets
Jacob Falkencrone
Global Head of Investment Strategy
The availability of GLP-1 drugs in pill form makes them ubiquitous, shrinking waistlines, even for p... -
Outrageous Predictions
Dumb AI triggers trillion-dollar clean-up
Jacob Falkencrone
Global Head of Investment Strategy
Agentic AI systems are deployed across all sectors, and after a solid start, mistakes trigger a tril... -
Outrageous Predictions
Quantum leap Q-Day arrives early, crashing crypto and destabilizing world finance
Neil Wilson
Investor Content Strategist
A quantum computer cracks today’s digital security, bringing enough chaos with it that Bitcoin crash... -
Outrageous Predictions
Taylor Swift-Kelce wedding spikes global growth
John J. Hardy
Global Head of Macro Strategy
Next year’s most anticipated wedding inspires Gen Z to drop the doomscrolling and dial up the real w... -
Outrageous Predictions
SpaceX announces an IPO, supercharging extraterrestrial markets
John J. Hardy
Global Head of Macro Strategy
Financial markets go into orbit, to the moon and beyond as SpaceX expands rocket launches by orders-... -
Outrageous Predictions
China unleashes CNY 50 trillion stimulus to reflate its economy
Charu Chanana
Chief Investment Strategist
Having created history’s most epic debt bubble, China boldly bets that fiscal stimulus to the tune o...