According to Emerging Portfolio Funds Research, investors have committed US$3.6 billion (HK$28.08 billion) into commodity mutual funds this year, which have returned 18 percent in the first four months of the year versus US$495 million allotted in the same period last year.

The Reuters-Jefferies CRB spot commodities index, a global benchmark that tracks a range including oil, copper, corn and coffee, jumped a record 12 percent in February (its biggest jump since the 1970s oil crisis) and its January/February performance of 15.3 percent is ahead of any other year since its inception in 1956!

Oil and gold prices led the headlines with predictions of oil above US$100 a barrel and gold above US$1,000 per troy ounce being satisfied. The current headline is the food story the so-called soft commodities.

The extent of the soft commodities surge is reflected in IMF data which shows that between 1975 and 2005 food prices declined by 75 percent in real terms.

A quick overview of the three factors outlined by Victor Heaney in Financial World magazine as being behind the surge in corn prices serve as an example of the pressures on much of the food supply chain.

Interpreting these drivers becomes a useful exercise in deciding whether or not food prices are genuinely in a longer term bull market or not.

Driver number one: The number of mouths to feed. Clearly, this number is rising.

However, rising populations do not in isolation support an extended bull run in prices. Food has a relatively "short run elasticity of supply" feature in that if prices rise because of supply needs, farmers are quick to plant more crops.

This supply-demand elasticity is longer with, say, base metals because of the time it takes to recover the material from the ground.

Driver number two: Rising wealth of populations is a factor that works with driver one to complicate the supply/demand factor.

A key part of impending resource scarcity is blamed on the rise in per capita consumption. From a food perspective, one trait that surfaces is the change in diet from cereal consumption to meat consumption.

Asian palates have grown since 1990 from 16.7 kilogram per head of meat per annum to 27.8 kg per head.

Importantly, this trend has a leveraged effect on the need for grain as it takes 7 kg of feedstock grain to produce one kg of beef.

Driver three: Largely a US phenomenon at present but capable of becoming global: the 2007 US Energy Act is committed to a fourfold increase in biofuel output by 2022.

In 1980 about 0.5 percent of the US corn crop was used for ethanol production, in 2007 this rose to 25 percent.

All leads to the conclusion that supermarkets shelves will become the window to one a very important issue facing global finances -- the price of food.

Ian Jackson is the general manager at wealth management consultancy Financial Partners

e-mail: ian.jackson@financial- partners.biz