SURGING demand from China, a craze for biofuels and difficult weather conditions have made agricultural commodities one of the hottest investments of the past year.

Everything from wheat to soyabeans is at or near record highs with gains of up to 100%, but the question is, can the boom last?

One man who ought to know is Christopher Wyke, one of Schroders’ commodities team, the investment brains behind its Alternative Solutions Agricultural Commodities fund.

While many of its rivals have struggled to make profits during the past six months, the £6 billion Agricultural Commodities fund is up an impressive 35%. Since it was created 17 months ago, it has risen 45%, according to Morningstar, a data provider.

The fund has been such a success that last week it shut its doors to new investors. The managers believe they can produce better returns by remaining small and nimble.

However, investors can still tap into the team’s talent using its sister fund, Alternative Solutions Commodities, which is up 47% since it was launched in October 2005. It provides exposure to agricultural commodities alongside metals and energy.

Wyke, 52, could just as easily have ended up in politics. In the late 1970s his first job after leaving Edinburgh University was as a speechwriter for Margaret Thatcher, then in opposition.

He was lured to the City, where for most of his career he worked as a bond-fund manager. It was only after he had joined Schroders in 2000 that he was offered the chance to move into commodities.

He gives his outlook for the sector.

Why are food prices so hot at the moment? Demand for the three Fs: food, feed and fuels. Most of the demand for food and animal ent on oil. The US is producing about five billion gallons of bioethanol a year, has 120 bio-fuel production plants and is building 68 more. But there is room for massive growth.

As with tech, though, aren’t we seeing a bubble? Not at all. We are at the start of a super-cycle that will see commodity prices trend upwards for the next 15 years or longer.

Commodity cycles tend to last an average of 20 years. We are only in year six with oil, year four with metals and year two for agriculture.

Isn’t there a risk farmers will just plant more crops and flood the market? There is a growing shortage of arable land. In Asia, it is estimated that 75% of land that could be used for crops is already under cultivation. In India that rises to 95%.

China has actually lost 9% of its arable land in the past 10 years as more of its population move into towns and cities. Desertification is also a problem, as is a growing shortage of water.

It’s true farmers planted more corn in the US last year because of demand for biofuels. However, that was at the expense of crops such as wheat and cotton, which, as a result, have risen more sharply in price than corn.

It’s likely that this year farms will plant a lot more wheat because the price is so high, which will probably lead to wheat prices weakening.

If you don’t like wheat, what would you invest in? We’re expecting coffee prices to rise sharply.

Consumption is rising in developing nations: in Brazil, Indone-sia and India it has risen about 50% in the past 10 years. In Mex-ico, it is up more than 120%.

We also have high hopes for cocoa, orange juice and cotton. Livestock is worth looking at too. If you are a pig farmer you are suffering because grain prices are rising. So what are you going to do? Sell off your breeding stock, which creates a shortage.

It’s likely we’ll see sharp rises in pig and cattle prices this year and next.

Oil reached a record high of $103 a barrel last week. Will it go higher? Over the long term the oil price will remain strong. But given the US is heading into recession and the rest of the world is slowing, the potential for a big increase in the oil price this year is limited.

What about gold and other metals? Gold will continue to go higher, driven by demand from investors worried about recession, the weakness of the dollar and the banks. Gold could reach $1,200 a troy ounce or even $1,500.

Couldn’t a global recession spoil the party? If there’s a prolonged global recession it won’t be good news. All investments are going to go down in that environment, but it is likely commodities will do better than most.

WAYS TO INVEST

SEVERAL exchange-traded commodities (ETCs) on the London Stock Exchange track resources. ETCs mirror the performance of an underlying index but can be bought and sold like ordinary shares.

There are also ETCs that invest in a less volatile basket of commodities.

Wyke also recommends Potash Corp of Canada, as demand has soared for fertiliser. Other stocks to consider include Mosaic and Agrium.

feed is coming from developing countries like China, as they move from a predominantly vegetable to a meat diet.

A meat diet is a very inefficient way of feeding the world. To produce 1kg of beef you need about 16kg of cereal feed such as wheat or soyabeans. But that has been great news for cereal prices.

The growth in biofuels is principally being driven by the West, particularly America, as governments don’t want to be depend-

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