Commodity prices look poised for further gains in 2010, spurred by global economic growth and a "classic inflationary set-up" presented by America's loose interest rate policy, a leading analyst has said.
This year's rally, which sent the Continuous Commodity Index up more than 30% at its peak in October, reflected the rejection of doomsday scenarios fostered by the economic crisis.
"In some cases markets fell to, and even below, the cost of production and did so off of sentiment that suggested demand was going to fall to depression type levels and not recover for years," Dave Hightower said.
Commodity markets "still have significant upward potential", helped a surge in numbers of wealthier, middle class consumers in developing countries.
The report follows bright outlook forecasts on farm commodities from a range of institutions, including Barclays Capital, Goldman Sachs and UBS.
'Explosion of capitalism'
"Global commodity demand looks to continue to grow, right along with the biggest explosion of capitalism in the history of mankind," Mr Hightower, founder of the Hightower Report, said.
Meanwhile, the Federal Reserve's policy of pursuing interest rates of 0-0.25% to support the economy looked like a prop to inflation, which is also typically a help to commodity prices.
"Adding into the equation what appears to be a long term devaluation of the dollar and unprecedented quantitative easing by the most of the world's central banks, one is presented with a spectacular, classic inflationary set-up for commodities," he said.
Nonetheless, investors might have to be more careful in what they buy, with 2010 likely to reward crop-picking more than this year, which witnessed a broad-based rally.
"One could say that 2009 was a year to 'close your eyes and buy everything physical'," Mr Hightower said.
"In contrast, 2010 looks like a year to be more selective."
He cited coffee, corn, cotton, orange juice and sugar as better bets, with cocoa, soybeans and soyoil lacking the same supply and demand fundamentals.