Global Food Prices on the Rise

We continue to receive validation from independent research that our firm's commitment to a secular overweight of commodities in general and agricultural commodities in particular is a sound asset allocation decision in light of the macroeconomic environment. My personal bet is that soybeans (pictured right), soymeal and soybean oil will be a particularly attractive place to park money over the next 6 months (and not just because of my personal edamame addiction). Here is the latest validation via Bloomberg:

Agricultural commodities may rise by as much as 50 percent next year because of crop shortages and demand from emerging Asian economies, Schroders Plc said.

Corn and palm oil will advance because of ``continued'' demand for ethanol and vegetable oils to make biofuels, while soybean and coffee may gain on smaller inventories, said Christopher Wyke, product manager at London-based Schroders, which manages $3 billion in commodities.

``The supply-demand balance for these commodities is very tight, which means they're vulnerable to any setbacks in production,'' he said in a telephone interview today. He declined to forecast prices.

Standard and Poor's GSCI Agriculture Index has advanced 32 percent this year as wheat rose to a record, while corn and soybeans climbed to multi-year highs. Commodities, which are outperforming stocks and bonds this year, may beat such asset classes in 2008 as the U.S. heads into a recession, Wyke said.

The UBS Bloomberg Constant Maturity Commodity Index of 28 futures contracts has returned 17 percent this year, compared with a 4.3 percent gain in the Standard & Poor's 500 Index of stocks. U.S. Treasuries have returned investors 8.9 percent, according to Merrill Lynch & Co. indexes.

On a side note, is anyone else feel relieved that oil is back under $88?