To: shades who wrote (60080 ) 5/1/2006 8:15:25 PM From: shades Read Replies (1) | Respond to of 110194 Cargill CEO: Too Much Hedge Fund Leverage In Market . By Stephen Wisnefski Of DOW JONES NEWSWIRES MINNEAPOLIS (Dow Jones)--The head of commodities giant Cargill Inc. (CRG.XX) believes that hedge funds have too much leverage in commodities markets and that it's just a matter of time before there's a "blow up" in some of the markets that have seen big run-ups in recent months. "There's more liquidity than I ever remember in my career," Warren Staley, chief executive of the privately held company, told reporters Monday on the sidelines of the annual meeting of the Society of American Business Editors and Writers. The large amount of leverage in certain markets "distorts beyond the fundamentals," he said. Staley, who took over as CEO in 1999 and has been with Cargill since 1969, said that investors who know little about commodities and who are in search of "the next big return" are responsible for an unsustainable build-up in liquidity. He added that some are bound to get their "fingers burned." The prices of commodities like gold, silver, oil and natural gas have soared to the highest levels in about a generation, spurred by factors including strong economic growth and rising demand from China. The gains have been accompanied by an influx of capital from hedge funds, pension funds and other institutional investors seeking diversification and higher returns amid relatively easy monetary policy. Cargill, based in Minnesota, provides food and agricultural products and services, as well as risk management and other financial services for customers. "We try to understand the best we can what the funds are doing", said Staley in response to a question about how the increased hedge fund activity affects Cargill's risk-management strategies. "They can swamp and overwhelm... and we need to understand that." "Maybe we need to stay out of the way", by sticking to investments in physical commodities, as opposed to futures markets, the Cargill executive said. He noted that soybean prices in the futures markets aren't as high as many people had anticipated, particularly given all the optimism about the potential for growing use of ethanol. In the U.S., ethanol fuel, which is being touted by the government and many companies as a solution to the country's reliance on foreign oil, is made primarily from soybeans. Staley said that futures market participants have come to the realization that the supply of soybeans on the physical market is "ok", which has put pressure on prices. He pointed to solid harvests in Argentina and Brazil. -By Stephen Wisnefski, Dow Jones Newswires, 312 952 4597, stephen.wisnefski@dowjones.com (END) Dow Jones Newswires May 01, 2006 19:48 ET (23:48 GMT) Copyright (c) 2006 Dow Jones & Company, Inc.- - 07 48 PM EDT 05-01-06