Even though U.S. stock market valuations went through the roof, AI monetization remains iffy, and the upcoming presidential elections bring a lot of uncertainty, making it prudent to downsize equities portfolios, one thing will keep making our investments profitable for the coming months. It’s rising inflation. Since commodities' prices are hard to manipulate (they enjoy real physical demand), inflation will inevitably prop them up, making our investments in such metals as copper (India’s economic demand!) and softs like cocoa and coffee — inherently lucrative.

Let’s take a look at one of the most popular gauges reflecting investors’ sentiment to the broad spectrum of various commodities as Deutsche Bank’s Commodity Index based ETF (DBC):

Let’s now see as much convincing bullish sentiment in cocoa futures:

New York cocoa prices recently hit an all-time high of more than $11,000 per ton back in April, mainly due to poor harvests in West Africa. Lower cocoa production in the Ivory Coast, the world's largest producer, is a bullish price factor, on top of the aforementioned predetermined money-printing-related inflation. That West African government’s data showed that Ivory Coast farmers shipped 1.61 MMT (million metric tons) of cocoa to ports from October 1 to July 7, down by -29% from the same time last year.

Another promising example of the commodities’ upsurge is coffee.

In particular, the cheaper coffee blend, Robusta, shows more and more signs of its price going parabolic. That is happening, again, on top of the overall pro-inflationary environment, due to extreme weather conditions in the two most important producing countries — Brazil and Vietnam. According to the General Administration of Customs of Vietnam, Vietnam exported 70,202 million tons of coffee in June, down -11.5% from the previous month and -50.4% from the same month last year, posting the lowest figure in the past 13 years. In addition, Vietnam's coffee exports in January-June fell by -11.4% YoY to 893,820 tons.

On March 26, Vietnam's Ministry of Agriculture reported that Vietnam's coffee production in the 2023/24 crop year will be 1,472,000 tons, down 20% due to drought and the lowest harvest in 4 years.

And last, but not the least. The world’s copper supplies saw major disruptions during summer 2023, and it looks like summer 2024 is following the same steps, as drought and production delays in top producer Chile hampered output of the material crucial to energy transition. Most investors seem to believe these constraints are in the past, and expect production to add 10% to pre-disruption levels, aided by the delayed opening of a massive new mine in Chile as well as restarts in Peru and Democratic Republic of Congo. That would push copper into surplus territory for 2024.

Copper demand is on track to double from 2022 to 2035, driven by the transition to a lower-carbon economy. Copper is crucial for electrifying the transportation sector and producing renewable energy.