Document summary
Structurally agricultural markets still present a conundrum: demand growth looks solid and there are many reasons for concern about whether supply growth will be able to match it. However stock valuations sensitive to the theme have expended. Soft commodity prices and Credit Suisse’s agricultural index have risen substantially. There are three specific reasons for caution: 2010 was a profitable year for farmers and better profitability triggers greater investment and production; adverse weather conditions, much of which relates to La Nina; and speculative positions in several soft commodities, particularly corn and soybeans are very high.