Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hello everybody, and welcome back to HardAssetsInvestor.com. I’m Mike Norman, your host. We’re here for the second half of my interview with Jurgens Bauer of Pit Guru. He is a trader on the ICE. Good to have you, as I said earlier.

All right, so in our last interview, we spoke about coffee, which you said, maybe 170 – still quite a move left in there; sugar still looking good, and cotton as well … reduced acreage it gave us the fundamental. Now let’s talk a little bit about orange juice and cocoa.

Jurgens Bauer, PitGuru.com, Intercontinental Exchange (Bauer): All right. First let me tell you that OJ had been undervalued last year; it’s a smaller market. I think that there’s concerns this year; we had a lot of concerns about drought conditions, although there had been rains this past week pretty much every day in Florida in the growing areas, which ought to take care of a lot that moisture concern. Demand had also fallen off, but I think demand is returning to its historical levels. I tend to believe that, again, we’re going to see prices kind of return to a normal level; in other words, head north of a dollar, head towards $1.15, currently trading in the low 90s.

Norman: Did it surprise you when we had that big run-up in commodity prices and then the collapse, and in some cases the retracement gave back all if not more of the original move? Did you think that was going to happen?

Bauer: I didn’t think the run-up was going to be as dramatic as it was; in particular, in cotton there was a two-year move in two days, and what happened is a lot of the legitimate farmers, producers who were depending on ... they’re selling their crop before it’s even planted, and all of a sudden the price goes up dramatically they get a margin call, and typically the bank would meet that margin call, but now the bank …

Norman: They got the credit crunch.

Bauer: … they got a credit problem. The bank is saying, OK, we’ll loan you the money, but at X outrageous percent. The farmer is never going to make a profit on his crop if he does that. So a lot of the merchants got caught with large short positions that needed to be financed and in going to the banks, they just discovered that there was a credit crunch, and so positions had to be covered at the top. That brought the thing right back down.

Norman: When you and I were traders – well you still are – but I mean back in the ’80s where you had … the markets were … you had the trade, you had people in the business, and then you had the professional speculators and they were there; they traded on the long side, they traded on the short side – there seemed to be more of a balance. Now what you have, it seems to me – and it came about with the advent of these index funds, these long-only vehicles – like a form of almost … you can call it hoarding. I mean, billions and billions of dollars, and you talked about how small these markets are relative to gold and oil, and certainly relative to equities or bond markets which are limitless.

Bauer: Sure, and then the currency markets.