London coffee ends down after touching highs

LONDON, Sept 6 (Reuters) - London front-month robusta coffee futures settled lower on profit-taking on Wednesday after touching a fresh 7-1/2-year high for the third day this week on short covering, dealers said.

"The market took a bit of a breather today," one dealer said, adding trading has been relatively quiet compared with previous sessions.

Front-month September ended down $24, or 1.2 percent, at $2,000, the bottom of the day's range, after touching a peak of $2,063, its highest since November 1998. Total volume was a moderate 11,651 lots.

"Pain is undoubtedly being inflicted on some 'naked' shorts," UK-based broker Sucden said, referring to those who had bet on a price fall by selling.

The front-month has risen about 12 percent since Monday and prices are about 40 percent higher than at the start of the year.

News of flood damage to exchange stocks in Italy just as supplies from the world's number one robusta producer Vietnam started to run out lifted the market in recent weeks.

"Speculators like the London market -- they make money buying it," Sucden added in a daily note.

Traders and analysts said it seemed that a large fund had taken a long position and either trade or industry buyers were struggling to cover their short positions, driving up the September contract.

LIFFE's issuers and receivers report for September robusta showed Fortis Bank had taken delivery of 1,496 lots out of 1,514 offered for tender since September 1, when the front month went into its delivery period.

PREMIUMS UP

Traders said the premium for the September over the benchmark November contract might increase significantly from its present level around $411, around its highest for several years.

"It (premium) could go further yet. If the shorts can't get hold of the coffee, it could go to $600, $700 even $800," a trader said.

Analysts said tight supply would keep prices high until 2008 and the premium between the front two months could grow until March.

Dealers said news of light frosts in Brazil, the world's key coffee producer, was feeding already bullish market sentiment, but without propelling the market significantly higher.

"It seems... people have already factored it in," one dealer said of the latest weather news.

A light ground frost was seen on some properties in Brazil's main coffee region in South Minas Gerais state overnight, with temperatures ranging from 3 to 5 degrees Celsius (37-42 Fahrenheit), industry workers said.

London's benchmark November contract, which had risen on the back of spill-over buying to hit a 7-1/2-year high of $1,618 in the previous session, trading down on profit-taking earlier in the session but then rallied.

The November contract settled up $6, or 0.4 percent, at $1,589 after moving between $1,604 and $1,565.

+++++

Nybot Coffee Review: Up Slightly After Scaling Tue High

NEW YORK (Dow Jones)--Arabica coffee futures ended firmer on the New York
Board of Trade on Wednesday after the market recovered from a test of Tuesday's
low and briefly scaled that day's highs with speculative buying.
December closed up 5 points at $1.1035 a pound and March gained 5 points to
$1.1415.
"We took a peak at the downside gap, but recovered with speculative buying
and short covering," a desk trader said. "A fund that's believed to be short
New York and long London was a seller again today, and has been selling
recently."
"Brazil's been dry, but they're heading into the rainy season so it's too
early to say they're in a drought," he continued. "It's surprising that Brazil
had some frost this morning and yesterday, but it was patchy and mostly away
from growing areas."
The Nybot December-March spread ended at 380 points, unchanged from Tuesday.
Futures volume was estimated at 9,591 lots and in the options ring, 5,861
calls and 2,829 puts traded.
Light frost in southern Minas Gerias, Brazil early Wednesday posed little
threat to trees, traders said. Brazil's groves should be mostly dry through
Saturday, according to DTN Meteorlogix. Rain has been below average in most
Brazilian coffee areas for months, and moisture is needed for the October bloom
of the next crop.
Brazil in August exported 2,458,524 bags, up 19% on the year, according to
the Green Coffee Exporters Council.
Meanwhile, North American and European roasters are procuring beans to meet
peak winter demand.
Coca-Cola (KO) on Wednesday introduced coffee and tea beverages, under the
brand name Far Coast, in Toronto.
Tightness in Asian robusta beans continues to buoy Liffe, and is in turn
helping New York prices.
Nybot December finds support at a gap at $1.0920 to $1.0845 and resistance at
$1.1120-$1.1125, $1.1150, $1.12, $1.1225 and $1.1250.
Nybot October coffee options expire Friday.

London coffee hits new highs on short covering

LONDON, Sept 5 (Reuters) - London robusta coffee futures rose to new 7-1/2-year highs on short covering on Tuesday, dealers said, adding that worries over the weather in Brazil were fuelling bullish sentiment ignited by tight supply.

Analysts said they saw prices remaining high as far forward as 2008.

The front-month September contract closed up $124, or 6.5 percent, breaking the psychological $2,000 level to finish at $2,024 a tonne after touching $2,047, its highest since November 1998.

"It (the market) is building on short covering. Pressure is on the shorts," one dealer said.

Traders said the buying on the front-month contract was spilling over into the benchmark November contract , which closed up 1.7 percent at $1,583, off a new 7-1/2-year high of $1,618 on a continuation basis.

Total volume across all the contracts was a strong 18,098 lots.

September's premium against November rose to a multi-year high of $463, which dealers said showed supply was tight and fundamentals strong.

Robusta prices, which are about 34 percent higher than at the start of the year, have soared in recent weeks after news of flood damage to exchange stocks in the Italian port of Trieste, just as supplies from the world's number one robusta producer Vietnam started to run out.

STOCKS RUN DOWN

Helmut Ahlfeld of German analyst F.0. Licht said current supply tightness was expected to be resolved by the next Vietnamese crop, but that 2007/08 could see a significant supply shortage.

"In the end, 2006/07 is expected to be balanced...The problem could be 2007/08, if the Brazilian crop is as bad as producers say," Ahlfeld said.

Kona Haque, commodities analyst with the Economist Intelligence Unit, saw prices remaining high until the last quarter of 2007.

+++++



NY coffee gains on robusta squeeze, Brazil chill

NEW YORK, Sept 5 (Reuters) - Arabica coffee futures climbed nearly three percent on Tuesday, fueled by market worries about tight robusta supply and cooling temperatures in top coffee producer Brazil, market sources said.

The New York Board of Trade's arabica coffee contract for December delivery rose 2.70 cents to settle at $1.1030 a 1b, the loftiest finish since Aug. 25, after trading from $1.0920 to $1.1080.

March arabica likewise gained 2.70 cents to end at $1.1410 a 1b and back months advanced 2.65 to 2.70 cents.

"In the short term, the London market is really helping," said Rohit Savant, a commodities analyst at CPM Group.

Indeed, nearby robusta futures prices in London have been hovering at their loftiest levels in more than seven years thanks to a near-term supply crunch for the bean mainly used for soluble coffee.

The LIFFE's benchmark November robusta contract settled up $27 at $1,584 a tonne, or 71.85 cents a 1b. By comparison, the front-month September robusta surged 6.5 percent to end at $2,024 a tonne, or 91.80 cents a 1b.

"It's hard to watch one variety of coffee skyrocket and sell yours," said James Cordier, president of Liberty Trading Group. "The shortage is going to last another 35 to 40 days and then there is going to be ample robusta. But for now, if you are short the market, you don't have anything to deliver," he said.

Limited supplies of fresh robusta beans from top grower Vietnam have hit the market but prices, supported by thin stocks, were still at record highs, traders from the region said [nHAN312730].

Meanwhile, temperatures in Brazil's south fell to their lowest levels in decades after a polar air mass followed rains into the region, but there was no threat of crop-damaging frost, said private Brazilian forecaster Somar [nN050FWEAT].

On Wednesday morning, temperatures in the top coffee growing state will fall to 1 degree Celsius (34 Fahrenheit) at the Pocos de Caldas airport. But temperatures in other nearby producing regions will not fall as low, Somar said.

Frost could harm the coffee trees developing for the 2007/08 crop, which is already expected to be significantly smaller than the 41.6 million 60-kg bags officially estimated for the 2006/07 crop.

"Very cool temperatures tonight are not expected to be damaging to trees," said U.S. forecaster Meteorlogix. "Weekend rainfall in major coffee areas of Sao Paulo and Minas Gerais, Brazil, has helped to improve conditions for the upcoming spring flowering of the trees," it said.

Still, the Brazilian government-run National Meteorological Institute (Inmet), which is traditionally more bullish on frost in Brazil, said there was still a risk of crop damaging cold in southern Minas and northern Sao Paulo.

Elsewhere, coffee exports in Costa Rica rose 9 percent in August versus the same month a year ago, but cumulative exports from the October-August growing season were down 12 percent at 1.38 million bags compared with the same period in 2004/05, growers group ICAFE said.

NYBOT arabica futures trading volume reached an estimated 13,392 contracts, up from the 10,146 lots officially tallied the previous session.

Market Watch

by Pearce Financial, LLC
September 4, 2006

December corn finds near term resistance is at last week's high of $2.482. If the market tops this high look for it to tag the current major daily Fibonacci .382 retracement at $2.544 (as measured between the contract high of $2.88 and the current contract low of $2.334). Further resistance is at the August high of $2.66 (all-session chart) in confluence with the current major daily Fibonacci .618 retracement at $2.672 (as measured between the contract high of $2.88 and the current contract low of $2.334). If December corn clears this resistance level it might pop up to the July high of $2.844 (all-session chart) or even test the contract high of $2.88 (all-session chart). Near term support is at the daily August low of $2.334 (all-session chart). Further support is located between the August low of $2.166 on the weekly continuous chart and the major weekly Fibonacci .618 retracement at $2.156 (as measured between last year's low of $1.856 on the weekly continuous chart and this year's current high of $2.642 on the weekly continuous chart). Failure to establish support here could bring the market down to this year's low of $2.034 on the weekly continuous chart. Open Interest is sitting flat near the all-time high. The Seasonal index shows that corn should decline in September. Commercial interests are holding the smallest net short position in five months. Large traders are holding the smallest net long position since late March. Small traders are holding a sizable net short position.

December wheat finds near term resistance clustered between last week's high of $4.244 (all-session chart), the August high of $4.252 (all-session chart), and the current major daily Fibonacci .618 retracement at $4.30 (as measured between the contract high of $4.63 and the August low of $3.766). A strong close above this resistance area could clear the path for a return to the contract high of $4.63. If December wheat hits a new contract high it could be gearing up for a run to the psychological five dollar area. Near term support is at the August low of $3.766. Further support is at a major weekly Fibonacci .618 retracement at $3.40 (as measured between between the 2004 low of $2.824 on the weekly continuous chart and this year's current high of $4.33 on the weekly continuous chart). A break below it could allow the market to decline to this year's current low of $3.214 on the weekly continuous chart. Open Interest has been flat for two months now. The Seasonal index shows that wheat should move sideways in September. Commercial interests are holding the biggest net long position that they have had yet this year. Large traders are holding the biggest net short position in seven months. Small traders are holding largest net short position that they have ever had.

December coffee finds near term support at the current daily Fibonacci .618 retracement at 104.10 ( as measured between the contract low of 98 cents and the August high of 114.00). A break below this retracement could send coffee down to test the contract low of 98 cents. If December coffee makes a new low expect it to hit this year's current low on the weekly continuous chart at 93.50. Further support is at the weekly December low of 90.75. Near term resistance is at the August high of 114.00. Further resistance is at the May high of 119.70 in confluence with the current major daily Fibonacci .618 retracement at 120.25 (as measured between the daily January high of 134.00 and the current contract low at 98 cents). If the rally does not end here coffee may visit this year's current high on the weekly continuous chart at 125.90. The Robusta coffee (traded on the EURONEXT Commodities exchange in Europe) has been the coffee market to be in! This market has substantially outperformed the New York coffee market on a comparative basis. Robusta coffee has surged to the highest price since March of 1999, the market is in backwardation (front month delivery contracts are trading at a premium to deferred contracts), and the price structure has been very bullish: On the monthly chart, November Robusta coffee has only broken a previous month's low once in the last five months, it has made higher monthly highs for five consecutive months, and it has not closed below the monthly 18-bar Moving Average since October of 2004. On the weekly chart, November Robusta coffee has only broken a previous week's low once in the last five weeks and it has made higher weekly highs for five out of the last six weeks. On the daily chart, November Robusta coffee has closed above the 18-day Moving Average every day for over a month. Coffee traders should be long in the Robusta coffee as long as it continues to outperform the New York coffee market. Open Interest is at the lowest level since early May. Seasonally, coffee should be flat to lower in September. Commercials are holding the biggest net short coffee position since the beginning of May. Large traders (hedge funds) are holding the largest net long position since then. Small traders are neutral on the coffee market.

November orange juice may have made a significant trend reversal last week. After opening gap up on the daily and weekly charts, the market reversed and filled the gap the same day. This triggered a Gap & Fill sell signal on both time frames. After taking out the previous week's high OJ then closed below the previous week's low. This created an outside reversal down on the weekly chart. Additionally, the market closed below the 18-day Moving Average for the first time since late July. Near term support is last week's low of 177.50. If the market breaks it, traders may want to consider getting short and entering a protective buy stop to liquidate if it breaks to new contract highs. Further technical support is at the daily August low of 168.50 (November OJ has only broken a previous month's low once in the last twelve months) followed closely by an intermediate daily Fibonacci .618 retracement at 166.70 (as measured between the July reaction low of 153.50 and the current contract high of 188.05) and the weekly 18-bar Moving Average (OJ has closed below the weekly 18-bar Moving Average just one time since it closed above it in mid-September). Further support is at the July reaction low of 153.50. Near term resistance is at the contract high of 188.05. Further resistance is at the two dollar mark. If the market does not stop here it should take on the 1990 multi-decade high of 206.50. Open Interest is up a bit from last month. The %R overbought/oversold indicator shows that OJ is overbought on the daily, weekly, and monthly charts. Seasonally, OJ should decline in the first half of August and then rally for the rest of the month. Commercials are holding the biggest net short position since mid-May. Large traders are holding the biggest net long position since then. Small traders are neutral to bullish.

State producing banner corn crop

Sep 04, 2006 (Messenger-Inquirer - McClatchy-Tribune Business News via COMTEX) -- Kentucky corn growers will have another banner crop to crow about this year. The U.S. Department of Agriculture is also expecting a record national crop.

"It's clearly a historic crop by any means," said Steve Riggins, a grain marketing expert with the University of Kentucky.

It even seems possible farmers will harvest the third-largest corn crop in the nation's history.

However large the corn yield, it won't be enough to keep up with demand.

With China and India clamoring for U.S. corn -- and with seemingly everyone constructing or at least thinking about building an ethanol plant -- corn is likely to remain a hot commodity for at least the next couple of years.

"It could be several years of good profits," Riggins said of what he calls the "ethanol bubble." "I think there's little danger of it collapsing in the next 24 months."

Corn growers in Kentucky and Indiana had excellent growing seasons. Even the Midwestern corn belt, which suffered some drought, is expected to produce at least an average corn crop.

"The yields don't look like they're going to be much reduced," in the Midwest, said Chris Hurt, a grain marketing specialist with Purdue University.

"From the farmers' standpoint ... they feel successful if they have a large crop, and that's looking really good," Hurt said.

The country also has an ample stock of corn in reserve. While the combination of a bumper crop and a large pool of corn would seem to be bad news for farmers, demand will continue to outstrip supply.

"When you combine the fact that you have this huge change in global demand that appears to be a permanent shift (with demand for ethanol), the talk is extremely bullish," Riggins said. " ...Almost everyone accepts it's the third-largest crop in history and it's not enough to (match) consumption."

"We're actually going to end up with much lower inventories of corn," Hurt said. "Ethanol is expected to grow dramatically. .... That's going to require a lot of corn."

Selling corn at harvest will not be the best option. Prices are historically low at harvest but rise as the winter progresses. A farmer who can store corn away will benefit from the decision.

By spring or early summer of 2007, corn prices could be about $2.75 a bushel, Hurt said

"Storage should be quite beneficial for corn," Hurt said.

Although this year's crop isn't even out of the field, farmers need to start planning for next year's crop, Riggins said.

For example, a farmer might be tempted to plant some winter wheat acres to take advantage of good wheat prices. But planting wheat will make those acres unusable for corn planting next spring.

"If you seed that wheat, you might be giving up the ability to raise $3.50 or $4 corn next year," Riggins said.

Another question farmers have to answer is whether to sign contracts that guarantee a specific price, or to hold out in the hope corn prices will continue to drift upward.

While Riggings doesn't expect the ethanol bubble to pop in the next 24 months, he said nothing is permanent.

"I would certainly say it won't last forever," he said.

Fortunes Made: Repeat in the Making?

By George Kleinman
24 Aug 2006 at 01:51 PM EDT

RENO (Future Market Forecaster) -- During the summer of 1995, few people had any clue that the biggest bull run in the history of the corn market had already begun. Prices had dropped from mid-July into mid-August because the government, in its mid-August crop report, indicated the U.S. would produce a record corn crop - similar to this year.

It was clear by the end of 1995 that a large crop wasn’t sufficient to keep prices down; corn prices rallied to record highs. But the real fireworks had yet to begin.

Fortunes were made in corn during 1996 when corn rocketed to $5.545 per bushel, but not many people realized during the summer of 1995 what was about to happen. Those fortunes were made by relatively few people.

Today, I see signs of complacency among corn buyers similar to those of the summer of 1995. The 1995-96 bull market was a classic demand-driven rally. The factors setting up today are, in my opinion, parallel to the factors that caused that dramatic bull move.

A number of factors contributed to the price spike a decade ago, but the most significant was a demand shock the likes of which hadn’t occurred since the mid-1970s and hasn’t since. Unknown to the marketplace during the summer of 1995 was that China, Asia’s largest corn exporter, was turning into a corn importer due to a poor crop. The U.S., the world’s largest exporter, produced a record crop in 1994-95 of 10 billion bushels. As a direct result of added Chinese demand (on top of normal export demand from Japan, the U.S.’ largest customer, and others), total exports surged.

In 1995, the world believed there was a huge stockpile of corn. But in 1996, a buying panic set in when the new crop looked to be smaller than average. Livestock and poultry feeders and industrial corn users worried the world was about to run out. As a result, prices surged above $5 per bushel - a level reached neither before nor since. We now know the world didn’t run out of corn; instead, record-high prices rationed demand, subsequent crops replenished stocks and prices retreated all the way back.

Here’s the Bottom line for the Current Market

Similar to the 1995-96 market, I believe the dynamics are in place for the next classic demand-driven bull market in corn. Last week I recommended that Futures Market Forecaster subscribers start accumulating positions in July 2007 corn futures. At this time, we’re risking less than $1,000 per contract traded and will look to reduce this risk over time.

The reward potential is amazing, many times the risk. There are no guarantees, and there's certainly risk in every trade. However, I’ll be looking to add to this position over time to hopefully pyramid into an extremely profitable trade.

Right now - when corn buyers are looking at a big crop (an expectation already reflected by cheap prices) and complacency has set in - I believe the corn market is forming a significant bottom. Just as the era of cheap energy is behind us, 2006 is the last year of cheap corn. The reason is ethanol.

With 100 ethanol plants either already up and running or close to production and another 35-plus due to come online next year, corn usage for fuel will surge. An average ethanol plant uses 18 million bushels of corn annually. Corn usage for ethanol will grow in 2006 by 300 million bushels versus last year and is projected to rise by more than 500 million bushels in 2007 versus this year. Even if 4 million or 5 million additional acres are planted next year, there’s no way demand won’t exceed supply by a wide margin in 2007.

This demand growth number is almost half of projected ending supply. For the first time ever, corn usage for ethanol will exceed corn exports. I believe July 1996 could be an analog of the July 2007 contract. In 1995-96, China provided the demand shock. This time the demand shock is ethanol, but the ramifications to the corn market are the same.

The July 1996 corn futures contract actually bottomed in December 1994, but there was a significant correction for a test of the lows in August 1995. (As I indicated, this year’s chart looks a lot like that year’s.) August 1995 was the time to load up on the July 1996 contract because prices bottomed at that time and remained in a major bull market until July 1996.

The July 2007 contract low was registered last December at 254. I believe this price will hold as the contract low. The market has now broken more than 40 cents from the mid-July top, and the bearish sentiment is high right now (just like it was in August 1995, right after the crop report that year).

One additional point: If there are any weather problems during next year’s growing season that create a supply shock, the perfect storm will take place. It could be a history-making bull market with the potential for new all-time-high prices. Should this unfold, we’ll also look to purchase the December 2007 futures contract. But we know nothing about next year’s crop, and today I’m looking for demand alone to pull prices higher (even assuming a good 2007 crop).

Right now appears to be the perfect time to begin accumulating a position, one we’ll look to pyramid over time as the market confirms our expectations.

Copyright © KCI Communications, Inc. 2006

George Kleinman is Editor of the futures trading service Futures Market Forecaster. Click here now to try a risk-free 90-day subscription to Futures Market Forecaster. He is also President of Commodity Resource Corp., a futures advisory and trading firm.

Jim Rogers Gives Kudos to Agricultural Commodities

By Lindsay Williams
12 Jun 2006 at 10:47 AM EDT

JOHANNESBURG (Business Day) -- Former George Soros partner in the Quantum Fund, Jim Rogers talks to Classic Business Day about his bearish outlook for the U.S. markets and the dollar, and his bullish commodities views especially with regards to agriculture.

LINDSAY WILLIAMS: When Classic Business Day spoke to Jim Rogers in December 2005 he had some fairly strong things to say about the U.S. stock market, the U.S. economy, the dollar, and incoming U.S. Federal Reserve head Ben Bernanke: “I’m not too optimistic about the U.S. stock market in 2006 - the economy will slow down, the market will slow down. The market’s been flat for a couple of years now, basically. Ben Bernanke will be a disaster for the U.S. Federal Reserve - his solution to everything is to print money. I’m not optimistic about the dollar, the stock market or the economy in the U.S. next year.” Jim, good evening.

JIM ROGERS: I’m delighted to hear that I got it right!

LINDSAY WILLIAMS: You got it right in spectacular fashion - do you really think Ben Bernanke is the cause of all the recent problems?

JIM ROGERS: No, of course he’s not the only cause - there’s lots of reasons. Just as I said last year inflation is coming back, prices are higher, interest rates are up, you’ve got an incompetent running the U.S. Federal Reserve, and America is overextended in the world including Iraq. There are lots of reasons for the market to be down - he’s just one of them. He’s going to make it worse - not better.

LINDSAY WILLIAMS: He gave CNBC presenter Maria Bartiromo that comment.

JIM ROGERS: If the press were his only incompetence we would be lucky! I’m afraid he’s incompetent in more ways than that - he doesn’t understand the economy, he doesn’t understand the markets, and he doesn’t understand the press - but with all due respect who cares about the press? We care more about the market and the economy than we do the press.

LINDSAY WILLIAMS: I’m not the press - I’m a broadcaster! The inflation problem - that seems to be the root of all stock market evil at the moment. Is that right at the top of your bearish list?

JIM ROGERS: It’s certainly one of the major reasons. We do have inflation - prices are going up, and they’re going to continue to go up. That has never been good for anybody except people who benefit from inflation - but for the mass of us it’s not good.

LINDSAY WILLIAMS: After inflation - any more problems?

JIM ROGERS: Sure, there’s the U.S. international debt - the U.S. is the largest debtor nation the world has ever seen. We owe the rest of the world $8 trillion or $9 trillion. That’s bad, but the worst is that our foreign debt is increasing at the rate of $1 trillion every 15 months! Do the arithmetic - it’s simple arithmetic, but it’s terrifying arithmetic.

LINDSAY WILLIAMS: Yes, it is terrifying - it’s also fairly terrifying after a few years of sideways movement on the Dow Jones, the Nasdaq, the S&P etcetera - but suddenly we’ve started to break downwards. I’m no chartist, but when I look at the graphs it really does look as though this thing could go so much lower.

JIM ROGERS: It will. I’m not a chartist either - but I do know it will probably go down a great deal more before it’s over. It’s not the end of the world - we hope it’s just a bear market. If it’s the end of the world then of course we’re all in trouble. I suspect that this time it’s just going to be another bear market - it might be a serious bear market, but we’ve had bear markets since the beginning of time.

LINDSAY WILLIAMS: We can always take advantage of bear markets of course because of the wonderful world of derivatives. Commodity prices have come down a bit since we last spoke - is it just a correction in a bull market?

JIM ROGERS: Yes in my view. Some commodities are not down - cotton is up, and agricultural commodities have actually been doing very well. Everybody looks at gold and copper - and perhaps oil - but underneath there are several commodities that are still doing well. It would be wonderful from my point of view if we had a nice correction in commodities - because we need one. Things that just never go down - that’s a dangerous kind of market - so I’m hoping for some more corrections.

LINDSAY WILLIAMS: That agricultural side of things is quite exciting.... Are those still your top picks of the commodity sector now?

JIM ROGERS: Yes, if I were looking for new opportunities in commodities I would be looking at agriculture - that’s where some great things are happening, and that’s where you’re going to find some opportunities, at least in my view.

A Look Into Jim Rogers' Crystal Ball

By Lindsay Williams
01 May 2006 at 09:38 AM EDT

JOHANNESBURG (Business Day) -- Jim Rogers shoots to prominence as co-founder of Quantum with U.S. multi-billionaire George Soros. The international best-selling author more recently achieves investment cult status with prophetic views on commodities. Below is an interview with Classic Business Day on the current state of the market.

LINDSAY WILLIAMS: Jim Rogers has been on Classic Business Day a few times, and his preference for commodities has proved spectacularly correct - maybe more correct than even Jim thought! Jim, as I said in my introduction, commodities continue moving up, but it seems to be gathering momentum - have these moves surprised you at all?

JIM ROGERS: Not in general terms - it has more than tripled in the last seven-and-a-half years. As you may remember I started a commodities index fund on 1 August 1998 - it’s up maybe 250% since then, which is a pretty hefty move - but it’s seven-and-a-half-years. In the end - as with all bull markets - when we get to the end in five, 10 or 15 years it’s going to startle everybody, including me, and I’m the bull. But that’s the way bull markets are - who would’ve thought that the Nasdaq would have gone up 10 times, who would’ve thought that Cisco would’ve gone up 100 times in the stock bull market - but that’s what happens in bull markets.

LINDSAY WILLIAMS: The bull market in oil has continued to surprise people it got very close to $75 a barrel the other day, maybe we could start with that - has it still got legs?

JIM ROGERS: Sure, and how. There may well be some setbacks - there should be - but adjust it for inflation and oil should be over $100 a barrel, and it’s going to go there because nobody’s discovered any giant oil fields in over 35 years. We just don’t have any oil - maybe there’s a lot of oil out there, but nobody knows where it is - so until somebody comes up with a lot of new supply of everything, the prices are going to be amazing.

LINDSAY WILLIAMS: Talking about inflation-adjusted prices - somebody suggested that the gold price should be over $2,000 an ounce. It’s currently around $650 - do you think there’s any chance we could get anywhere near that number?

JIM ROGERS: There’s no question that in every bull market, and in any asset class throughout history - in the end nearly everything makes a new all-time high. Gold’s old all-time high was $875 - unadjusted for inflation - so we’re certainly going to go to $900 or $1,000 and that’s in the cards. I’m we will get to $2,000 on an adjusted basis, but not this year or next year, but certainly in the next 10 years everything is going to go to astonishing levels. By the way, I’m probably less bullish on gold than I am on most things - but most mines are depleting, and every other kind of mine - so there are problems brewing in all raw materials.

LINDSAY WILLIAMS: When you say that you’re not as bullish on gold as others, that’s all relative - what would be your chosen commodity if it’s not gold?

JIM ROGERS: I’m not smart enough to tell you which is the best one right now - I can tell you if I were looking for new opportunities, it would be looking in the agricultural area. Those are the places where they haven’t moved up nearly as much on a historic basis, and where there are positive fundamental changes taking place - so that’s where I would be looking.

LINDSAY WILLIAMS: Sugar has done very well indeed -we spoke about that about six months ago. It has gone to about 18 cents per pound from its low not that long ago of 2.5 cents a pound. The corn market seems to have gone completely flat - maize as we call it in South Africa - is that one you’d pick?

JIM ROGERS: Yes, I would definitely be looking at maize - there’s no question about that, especially given that the US is about the throw huge amounts of money at maize to turn it into ethanol. It’s absurd - because it’s uneconomic, and it’s just a huge subsidy to buy some votes from the Republicans - but who cares? They’re going to throw the money whether I like it or not - so certainly there’s going to be great opportunities in maize.

LINDSAY WILLIAMS: Apart from the fundamentals that I know you’ve been very keen on - the Chinese economy, and the Indian economy - there other things out there as well. The last few days has seen a tumble in the U.S. dollar, also we’ve seen political considerations start to raise their head again with the Iran nuclear stand-off - are those things you watch very carefully?

JIM ROGERS: I try to watch everything very carefully - if you’re going to be an investor you’d better watch everything very carefully, and even then you’re probably going to make mistakes, I certainly do. Yes, geopolitical considerations are major - whether we like or not the oil is in the Middle East, and that’s where there are potential problems - but there are also potential problems in other oil countries. Equally important is that all the oil fields in the world are in decline because there haven’t been any gigantic discoveries in over 35 years.

LINDSAY WILLIAMS: Yes, and statistics from the U.S. government says there were 11,000 terror attacks last year - 14,600 people dying, more than 30 a day - and that doesn’t look as though it’s going to get any better. What’s the general feeling from the American public about the situation with Iran? Do you think that Donald Rumsfeld and US president Bush might actually do something about this situation?

JIM ROGERS: I would be dumbfounded, amazed if they did - because it would be such a foolhardy thing to do - but these guys have proven themselves very capable of doing foolhardy things, so I would not put it past them. It would be a major disaster for the world, for the rand, for the U.S. - for all of us - but that doesn’t mean these guys won’t do it, because they really believe that they’ve got the message and nobody else does.

LINDSAY WILLIAMS: One thing that seems to surprise people over here is the resilience of the U.S. stock market - we’ve seen a little bit of a crack today with Microsoft coming down, but even then the major indices all hovering near multi-year highs - what’s your view on U.S. equities?

JIM ROGERS: First, let me just point out that the last couple of years they’ve been flat. They were very good in 2003 but in 2004 and 2005 they were essentially flat - they were up a bit this year, but over the past two-and-a-half years they were not up very much. Maybe some are, but the general averages are not. I expect a U.S. general recession sometime later this year - or certainly within a year - and you’re going to see bad things happening in the stock market as result. I would not be buying U.S. stocks.

LINDSAY WILLIAMS: So we stick with commodities?

JIM ROGERS: Yes, if you got to own something - and I guess we all do - one of the things that you should consider owning is commodities, especially agricultural commodities. If there is a recession commodities may go down, but they’ll go down less than everything else - and they will be the first thing to start rising again, just as they have in the past seven-and-a-half years.