Societe Generale has followed Goldman Sachs in warning of tougher times for commodities prices, warning that the end of easy monetary policy in the US "could well herald the end" of the sector's rally.
The conclusion of the second round of so-called quantitative easing, or QE2, in which the US Federal Reserve has been pumping money into the economy through bond purchases, will deprive commodities of a key ingredient of their winning streak, the French bank said.
Many observers, including Federal Reserve chairman Ben Bernanke, have denied that the cheap money fostered by the quantitative easing programme, which is scheduled to end next month, has been a big factor in raising commodity prices.
However, Societe Generale cited shipping costs as a sign of the health of underlying commodities trading, noting that the Baltic Dry index, which measures the cost of chartering commodity-carrying vessels, had failed to recover from the global recession.
'End of the bull market'
"This suggests that the commodities bull run support by QE2 may run out of steam in the third quarter if the global economy shows any signs of weakening," Societe Generale said.
"The end of QE2 on June 30 could well herald the end of the commodities bull market."
As a further headwind to commodity prices, the bank noted that inflation expectations could fall as the closure of quantitative easing lowers pressure for prices rises.
Commodities are often seen as a good hedge against inflation, being the kind of raw materials whose appreciation is implied in higher inflation rates.
"If emerging market economies slow and abundant liquidity dries up after QE2, deflation fears may be back on the agenda in the second half of 2011."
Gold to escape?
The comments come three weeks after Goldman Sachs cut its rating on commodities, if for different reasons.
Goldman warned of a "growing conviction" of declines in raw material values as over-valued oil falls back to earth, and as companies manage inventories better in the face of higher commodity prices.
Unlike Goldman, Societe Generale did not exclude agricultural commodities from its alert, seeing gold and silver as the sector's best bets as further weakness in the dollar maintains investors' interest in precious metals.
Although gold has set nominal highs, above $1,500 an ounce, adjusting for inflation the metal remains well below the $2,435 an ounce which prices hit early in 1980, in today's terms.
The comments come amid a series of observations that managed funds' love affair with agricultural commodities may be on the wane, in favour of other raw materials, notably metals, or other asset classes.
Analysts at Australia & New Zealand Bank noted on Monday that latest US regulatory data showing a 10,000-contract rise in speculators' net long interest in Chicago corn "may well indicate investor enthusiasm for grains is running out of steam".
However, the peak comes at a time when speculators' net long interest is corn is only25,000 lots short of last year's record long of 365,000 lots.