LONDON — Agricultural commodities appear
set for a sustained bull run and a sell-off of futures in
March after a sharp rally early in 2008 could just be a
temporary correction, high-profile hedge fund manager Hugh
Hendry said.
"There is an acute shortage now in basic foodstuffs," said
Hendry, who is chief investment officer and partner at Eclectica Asset
Management, speaking at the Reuters Hedge Fund & Private Equity Summit in London
on Wednesday.
Grain inventories are extremely low, he added.
"We are approaching unbelievably low levels (of stocks)," he
said.
Furthermore, heavy use of US corn (maize) supplies to
manufacture ethanol biofuel had reduced the availability of corn for food, and
many US farmers had switched out of corn into other crops, he added.
"Time favors the agricultural commodity sector," he said.
But he said surging food and fuel prices risked triggering
political upheaval in the world’s poorest countries.
Agricultural commodity futures from grains to coffee, cocoa
and sugar soared early in 2008 on heavy buying by investment funds and other
speculators, but prices fell sharply in March in a sell-off across the
commodities complex.
Hendry said the March sell-off was more likely a temporary
correction during a prolonged bull run that was set to continue for some time.
Tight supplies of food, limited availability of land, competition in land
usage for production of biofuels, and rising demand, are creating serious food
supply shortages and triggering rising food prices around the world.
