The great oil and metals bull run seems to have come to an end - perhaps not with the bang many had predicted, but with a whimper of underperformance. But the commodities story is not over. Soft commodities - agricultural products such as grain, pork bellies, coffee and sugar - seem to be taking over as a hot investment area.

The fundamentals are strong. On the demand side, there's a global food scarcity, and with the world population increasing by 75 million people a year, it looks set to continue strong.

Even in tough economic conditions, demand for most soft commodities is relatively inelastic. People won't stop eating because they have less money - they may trade down in brand, but that will hurt retailers and food product manufacturers, not the commodity markets.

For some softs, though, the market has suddenly expanded dramatically, as biofuels have introduced a new source of demand. Changing eating habits have also contributed to growth in some markets. For instance, the market for grain is driven not just by human food demand, but by demand for animal feedstock. Consumers in developing countries are eating more meat, which creates more demand for feedstock grain, so the market is likely to remain buoyant - though the record prices seen in 2008 might not be repeated

In the US, more corn is being processed for ethanol, putting upwards pressure on corn prices. In 2008, over 90m tonnes of US corn was processed for ethanol - for the first time, more than the amount of corn that was exported. The USDA expects biofuels to use nearly a third of world supplies, so this is a step change in demand for the commodity.

Like metals and oils five years ago, before the bull run started, soft commodities have seen 20 years of low prices. That has led to underinvestment - which sets up the conditions for a tight supply side. Lower yields, lower acreages, and inefficient production processes can tighten supply considerably.

However, each commodity has its own foibles - getting the overall direction of the market right doesn't necessarily mean investors will make money. In corn, conditions have been favourable this year, and the harvest will probably be larger than expected. That's led to a slump in prices, against the trend. Government intervention ion one market can also lead to unexpected impact in others - for instance because farmers…

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