Commodities: Investment-flow sense and nonsense
A HUGE RALLY in the prices of agricultural commodities over the past two years and a compelling investment story that weaves in favourable secular trends in both supply and demand have attracted an unprecedented amount of investor interest. A sharp correction in prices at the end of the first quarter of 2008 has, however, put convictions to the test and led to a shaking out of speculators and a re-evaluation of strategies. With investors converging on the consensus that the rally in agricultural commodity prices has moved into a new and slower phase, they are increasingly looking at new ways to play the theme.
Agriculture was the darling of commodity investors in the first quarter of 2008, attracting close to $4 billion in net investor inflows, more than any other commodity sub-sector including energy, as investors chased stellar increases in the prices of staples such...
