Agricultural commodities represent a more attractive home for money than bonds, or even gold, for 2010 as "quality" overtakes "recovery" as the central investment theme, UBS has said.
The bank has raised to "overweight" from "market-weight" its rating on farm commodities, saying they are poised to play "catch up" with assets such as industrial metals, which have enjoyed particularly strong performances in 2009.
With the world economy growing by 3.6% next year, a "subdued rate by comparison to past recoveries", investor attention will switch from the so-called cyclical assets viewed as the first line of beneficiaries from the emergence from recession.
Feel the quality
"Quality will matter more in 2010 relative to 2009, when cyclical strategies did better," UBS said.
"The performance of cyclical commodity prices should become more subdued in 2010.
"Much good news is already in the price and indeed oil and copper prices are now above our estimates of fair value.
"A rotation into agricultural commodities is warranted."
UBS applied its upgrade to both crop and livestock contracts, although, at 1.25% apiece, they still represent a small part of the bank's ideal portfolio, with equities taking the lion's share, at 55%.
Nonetheless, the allocations were more than the 1.0% recommended for gold, which looked "unlikely" to repeat its strong performance of 2009, when it has hit successive record highs.
"To be sure, policy and economic uncertainty remains elevated, but it is difficult to believe that those factors alone can support recent gold price gains," the bank said.