Agricultural commodities set for bull run

LONDON (Reuters) - Agricultural commodities appear set for a sustained bull run and a sell-off of futures in March after a sharp rally early in 2008 could just be a temporary correction, high-profile hedge fund manager Hugh Hendry said.

"There is an acute shortage now in basic foodstuffs," said Hendry, who is chief investment officer and partner at Eclectica Asset Management, speaking at the Reuters Hedge Fund & Private Equity Summit in London on Wednesday.

Grain inventories are extremely low, he added.

"We are approaching unbelievably low levels (of stocks)," he said.

Furthermore, heavy use of U.S. corn (maize) supplies to manufacture ethanol biofuel had reduced the availability of corn for food, and many U.S. farmers had switched out of corn into other crops, he added.

"Time favors the agricultural commodity sector," he said.

But he said surging food and fuel prices risked triggering political upheaval in the world's poorest countries.

Agricultural commodity futures from grains to coffee, cocoa and sugar soared early in 2008 on heavy buying by investment funds and other speculators, but prices fell sharply in March in a sell-off across the commodities complex.

Hendry said the March sell-off was more likely a temporary correction during a prolonged bull run that was set to continue for some time.

Tight supplies of food, limited availability of land, competition in land usage for production of biofuels, and rising demand, are creating serious food supply shortages and triggering rising food prices around the world.

"The agricultural market is profoundly bullish," Hendry said.

(Reporting by David Brough; Editing by Paul Bolding)