e Agriculture Preference: underweight : Current (25 June) (last month): Soybeans, USD 14.79/bu (USD13.82/bu); Corn, USD 6.09/bu(USD 5.79/bu); Recommendations Wheat, USD 6.91/bu (USD 6.80/bu) Tactical UBS View 6-month target: Soybeans, USD 13.5/bu; Corn, USD 5.10/bu; Wheat, USD 6.00/bu = *:- The forward curve in corn already factors * Besides the overall commodity price backdrop, prevailing dry weather conditions in the US have been __ ina steep decline by the end of the year, price supportive for the grains and added to firmer prices. thereby mitigating the expected negative ¢ While weather-related news flows might support grain prices in the short run (downward revisions in return. With lower corn prices, wheat grain yield estimates, especially corn), the 6-12 month price outlook remains negative. Global corn should come under pressure as well. Most inventories should grow beyond 10% in 2012/13. We think this will more than compensate for firmer agricultural commodities are generally wheat fundaments (lower inventory estimates) in the coming months. For soybeans, current price levels well supplied, so unless the weather sufficiently factor in the poor supply figures seen in recent months. This would be especially true, if South surprises on the downside, we expect American planting gets a boost due to soybeans’ relative price improvement. further weakness. ¢ A strong supply backdrop for Brazilian coffee along with a weaker BRL has kept coffee prices under Strategic pressure. For 2012/13, Brazilian coffee and sugar exports are likely to increase by 12% and 2% y/y « Strategic agricultural positions are not respectively, and keep the global market well supplied in 2012. Cotton prices saw some bouts of strength, recommended at present. Our return but demand has yet to work off high inventory levels at 74-75mn bales. With ample inventories and outlook for the grains stands at -7.5% to economic conditions at risk, renewed price weakness is likely. - 5% over the next 12 m