Commodities "horribly" hit, not killed: Rogers

NEW YORK (Reuters) - Jim Rogers, the famous investor and author on commodities, said on Thursday the credit crisis has not killed the bull market in commodities as many imagined, but just dealt it a "horrible setback".

"In 1987, we had a horrible decline in the stock market. Do you think that was the end of that bull market?" Rogers asked a panel of journalists at the Reuters Investment Outlook 2009 Summit in New York.

"Remember: Commodities are essentially based on supply and demand. Now, you have demand declining but at the same time you have supply going down even more. So, we are going to have higher prices, eventually," said Rogers, who is also founder of the Rogers International Commodity Index .RICIX.

The World Bank predicted in a report this week that the commodities boom of the last few years had "come to an end", and that prices of oil to agriculture will not see the record peaks of this July for at least another three years.

Some market participants say the credit crisis has also exposed the flaw in long-only commodities investing advocated by indexes like Rogers' -- where investors are advised to maintain bullish positions in energy, metals and agriculture futures, regardless of market turns, in order to profit.

The Rogers' index is down almost 40 percent on the year, after posting a 30 percent gain till July. Many of its rivals have suffered similarly, leading to suggestions that investors may be better off with strategies that allow them to also "short" - or go bearish on -- commodities when needed.

Rogers said his success as an investor came almost entirely from finding "cheap" investments and holding them for years, if not decades.

"What you do in times like these is you find and buy the things where fundamentals are unimpaired. The only thing good I know where the fundamentals are unimpaired or where they have actually improved are commodities."

"Farmers are not getting loans to buy fertilizer now. Nobody can get a loan for a zinc mine now. All the mines are either closing and the ones still in production are using their reserves. Nobody can make new oil discoveries because prices are so low."

Rogers likened the correction in commodities to the sell-offs that stocks had seen since the 1987 crash. "There were some horrible setbacks along the way. I see this as just one of those horrible setbacks."

U.S. crude oil jumped more than 10 percent to settle at $47.98 a barrel Thursday after the head of producer group OPEC called for "severe" output cuts and non-OPEC member Russia said it may help contribute to the reduction.

Rogers said it could take longer than OPEC expected for crude to return above the $70 level desired by producers.

"It can sell below the cost of production for two or three years. This is not the first time in history that it has sold below the cost of production.

But Rogers, who bought oil for the first time in 10 years last week as prices were more than $100 a barrel below July's record, admitted he was a "horrible market timer".

"The fact that this has only happened in eight or nine times in the last 150 years and the fact that it's historic does not make it any more fun," he said.

(For summit blog: summitnotebook.reuters.com/)

(Editing by James Dalgleish)