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| the FED has to fight there European counterparts on this one:
Crop prices 'at risk', as trading clampdown looms
Investors should reverse their "substantial" push into farm commodities for fear over the impact of a potential regulatory clampdown, Societe Generale has said.
The bank cut to 5%, from 7%, its recommended weighting of commodities in investors' portfolios, preferring emerging market shares, whose performance has been closely correlated with commodities, but which do not face the same threats of trading restrictions
However, it was particularly dismissive of agricultural commodities, which it said should account for only 1.2% of the ideal portfolio, and on which is has placed an "underweight" rating, compared with "overweight" in metals.
Crop prices were "at risk", Societe Generale said in a report, revealing a "clear preference" for base metals and gold.
'Stay away'
While noting that crops had proven the most popular commodity class even before the latest rally, attracting "substantial inflows" of some $10bn in the last nine months of 2009, it urged investors now to "stay away from soft commodities".
The group based its warning on "skyrocketing prices", which have left farm commodities will an "expensive valuation", as well as "regulation risks" which the G20 group of economic powers is considering.
"The next G20 [meeting] is expected to opt for further regulation on commodity trading," the bank said.
'Scandalous'
Financial regulation has been a priority on the agenda of the G20 group of nations since the credit crunch sparked concerns that banks were being too softly handled by authorities.
Selected SocGen asset weighting recommendations (change on June)
UK equities: 10%, (+3 percentage points)
Other EU equities: 7% (-3 points)
US equities: 20%, (-2 points)
Emerging market equities: 3% (+2 points)
Commodities: 5% (-2 points)
Agricultural and livestock commodities: 1.2%, (-0.5 points)
Energy commodities: 1.2%, (-0.5 points)
Percentages give recommended weighting in ideal portfolio
However, the prospect of commodity trading, particularly that in crops, being caught up in reforms has risen with France's forthcoming stint in the G20 chair.
France has been particularly vocal in its campaign for curbs on farm commodity trading, both within the G20 and in the European Commission, where its delegate, Michel Barnier, is internal market commissioner.
Mr Barnier on Monday, revealing plans to reform Europe's commodities regulation, condemned as "scandalous" commodities market "hyper speculation", which many European politicians have blamed for rises in food prices, both this year and in 2008.
Speaking with Dacian Ciolos, EU farm commissioner, Mr Barnier said: "We share the same determination and the same outrage against all those tempted to abuse these markets that have the greatest impact on the lives of our citizens."
Mr Ciolos said that Europe should consider limits on commodity positions, a measure introduced in the US last year "to counter excessive movements" in prices. | |
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Bernanke says we need more inflation
