Several soft commodities rallied with energy products and metals Monday as the dollar fell following the International Monetary Fund’s upward revision to its global growth forecasts for 2018 and 2019.
Arabica coffee for March delivery climbed 1.1% to $1.2255 a pound on the ICE Futures U.S. exchange. Meantime, March cocoa added 0.4% to $1,938 a ton, paring gains after rising as high as $1,975 in the session. Frozen concentrated orange juice for March also posted gains, closing up 1.3% at $1.4845 a pound.
The IMF said the global economy will gain momentum, driven in large part by recently approved U.S. tax-code changes.
Although analysts say several soft commodity markets are well supplied, Adam Sarhan, chief executive of 50 Park Investments, said he expects demand to grow as the global economy strengthens, supporting prices.
“The tax cuts have big implications,” he says. “That helps demand, both domestic and international.
“Commodities as an entire asset class are deeply undervalued” following a yearslong downturn in prices, especially relative to stocks, he added.
The greenback’s fall has been another factor boosting dollar-denominated commodities recently by making them cheaper for overseas buyers. On Monday, the WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, fell 0.2% following a sixth consecutive week of losses.
Some analysts have said investors covering short positions have also led to sporadic gains in the sector this year.
In other markets, March raw sugar pared earlier gains and closed down 0.6% at 13.17 cents a pound and March cotton inched down less than 0.1% to 83.41 cents a pound.