ConAgra Foods on Thursday said it had agreed to sell its commodity trading and distribution business to hedge fund Ospraie for $2.1bn in an effort to focus more on its core packaged food operations.

Ospraie’s private equity unit will pay ConAgra $1.6bn in cash and $525m of debt securities for the business, which merchandises and distributes grains and fertiliser, and trades agricultural and energy commodities.

Ospraie, a $9bn hedge fund that focuses on commodities and basic industries, will use the ConAgra Trade Group acquisition to broaden its exposure away from pure commodities trading and into the actual business of commodity sales and distribution.

The deal, which will also give Ospraie better insight into the market for physical commodities, follows similar moves by hedge funds and investment banks that trade commodities and oil to gain a better ground-level view on those markets.

Goldman Sachs now owns a stake in an oil refinery and a natural gas pipeline in the US, and hedge fund Highbridge Capital bought into the energy business of natural gas marketer Louis Dreyfus last year.

“Having the business within a firm that focuses on commodities is optimal,” said John Duryea, the portfolio manager of Ospraie’s Special Opportunities fund.

“We’re the much more logical, natural owner of the business.”

The deal will allow ConAgra to hive off one of the remnants of its once-large commodities operation and reduce its exposure to trading risk.

But it will also eliminate the boost the high-performing business has recently given to ConAgra’s profits.

Gary Rodkin, ConAgra chief executive, said the company would use the capital generated by the sale largely to fund share repurchases.

Standard & Poor’s raised its view on shares of ConAgra after the announcement, citing less risk to profits as a result of the divestiture.

With food and oil prices near record highs and demand for commodities strong, investors who have poured money into the industry in recent years have minted money.

In the event that commodities pricing does not hold up indefinitely, however, hedge funds with exposure to physical goods and better insight on trends in the market can help offset that hit.

“The volume story is a multi-year story that’s not slowing down,” Mr Duryea said. “That’s what’s behind the success of the business – it’s less about pricing, and more about volume.”

Ospraie has secured a $1.5bn credit facility from a group of banks led by JPMorgan as part of the deal, which will help sustain the business once it is cut from ConAgra’s financial support.

Once the sale is completed, which the companies expected to occur within 60 days, the ConAgra Trade Group will be renamed Gavilon LLC.

It will remain based in Omaha, Nebraska.