Agriculture May Gain 50% Next Year, Schroders Says
By Saijel Kishan
Dec. 3 -- 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.
Schroders' Alternative Solutions Commodity fund has returned 22 percent this year, while the firm's $2 billion agriculture fund has gained 19 percent. Schroders is London's largest publicly traded fund manager.
Precious metals may climb next year as a weakening dollar, inflation and rising credit defaults spur demand for gold and silver as safe havens, Wyke said. Gold for immediate delivery has risen 23 percent this year, reaching a 27-year high of $845.84 on Nov. 7. Silver is up 7.2 percent.
Energy prices will ``continue to be volatile'' in 2008, Wyke said.
To contact the reporter on this story: Saijel Kishan in London at
