Page 1 of 2 As Brad Zigler discussed yesterday, agricultural commodities have outshone many other hard assets over the past quarter, including base metals and energy. But can the good times last? Don't get your hopes up, says ag expert Kona Haque. According to her analysis, bearish times are ahead across the board in the agricultural markets, from soybeans to coffee. Haque is a commodity strategist and analyst with Macquarie Bank Ltd in London. With over a decade of experience in the commodity market analysis, her expertise on ags in particular has been sought by the Financial Times, Reuters, CNBC, Bloomberg and other media outlets. Recently HAI Associate Editor Lara Crigger sat down with Haque to get her perspective on the ag markets, including why she thinks wheat has further to fall, why she thinks the coffee rally is "bizarre" and whether the Liffe is likely to impose position limits any time soon. Crigger: In a recent market analysis, you stated your short- and midterm outlook for agricultural commodities was bearish, almost across the board. Are there any bright spots left in the ag market for 2010? Haque: No. These projections were actually done back in June, and since then there have been quite a few developments in the market which have actually made us become less bearish. Primarily we've now moved to a crucial weather market, particularly for the grains. We have noticed a lot of weather concerns developing in Europe and the former Soviet Union. Also, in the U.S., we're looking at the possibility of a La Niña weather phenomenon, which would essentially mean a drier-than-normal July and August—months which are crucial for the corn and soybean grain crops. So right now, we're seeing a little bit more excitement in the market. Previously, there were of course bumper crops throughout the world, and a lot of carryover in stocks, so the only thing that could stopper that is if crops didn't go to plan. But right now we are seeing some concerns, the most direct and confirmed of which is the situation for wheat in Europe and the former Soviet Union. That has caused wheat supplies and exports on wheat to fall quite sharply. But again coming back to your point on whether we're bullish or not, I think that the wheat market is actually one of the few markets that actually can cope with any disruptions, because there is so much more supply available in stocks. Crigger: Do you think we'll see production downgrades, at least? Haque: Well, the potential is definitely there. The weather forecast continues to point toward drought conditions in Russia, so we're not very hopeful on much recovery in the former Soviet Union at this stage. Europe is expected to get some much-needed rains over the next few weeks, which should be quite beneficial for the old crop. But generally, we are still looking at very comfortable stock level in the U.S. The wheat stocks for the season just finishing are about 40 percent higher than they were last year. So again, there are a lot of stocks of wheat around [which] can be used to alleviate any supply concerns.
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