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SINGAPORE: Commodities-hungry investors have been feeding on the sector, sending prices skywards amid increasing demand, rising inflation and high fuel prices.
However, some analysts said soft commodities such as palm and soya bean may see a sharp retraction in prices of as much as 25 per cent in the coming year.
Analysts said the recent spike in commodity prices was partly due to an influx of speculative funds using commodities as an inflationary hedge and some warned that there may be more upside to come.
Adrian Koh Associate, Asian Commodities, Phillip Futures, said: "Many people will think that commodity prices have actually risen quite a bit. But in my point of view, I think it still has some more to go before it comes back down because what we usually see is a commodity bull run that lasts 10 to 15 years. So, we're probably running about eight to 10 years."
Corn prices have risen some 58 per cent in the last year, with soya bean oil rising by over 36 per cent, and crude palm oil rising by over 16 per cent.
However, some analysts said they expect the prices of soft commodities like palm oil and soya bean to drop due to suppliers increasing production to keep up with demand, which in turn creates a surplus in produce.
For investors looking to tap into the commodities boom, market-watchers said some bargains may still be found in the stock market, including shares like Singapore-listed China Milk.
Although soft commodities may be in for a dip, industry players said agricultural options connected with the sector such as fertilizer manufacturers may continue to perform well and remain an important theme for investors. - CNA/vm
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