Risk and Return Profile of Agricultural Commodities

As an investment analyst specializing in commodities, you have been assigned to assess the risk and return profile of investing in agricultural commodities, particularly corn and soybeans. During your analysis, you are to consider the effects of geopolitical tensions, climate change, and economic factors such as inflation and supply chain disruptions.

Specifically, address the following:

1. Describe the primary types of risks associated with investing in agricultural commodities and their potential impact on returns.
2. Discuss how the correlation of agricultural commodities with traditional asset classes, such as equities and fixed income, can affect diversification benefits in a portfolio.
3. Propose strategies to mitigate risks specific to agricultural commodities while enhancing potential returns, mentioning how these strategies align with the principles of modern portfolio theory.