Will the bull market in agriculture and agribusiness continue for the rest of 2008 and beyond? The charts of most agricultural indexes have topped off this past month, and have even dipped, indicating a potential retreat. For investors in agricultural ETFs or futures indexes, one of the keys to the agricultural commodity markets over the next six months will be the weather. In recent days, corn and soybeans fell to the lowest point in six weeks on speculation that warm, wet weather will hasten plant development and boost the yield potential of the two crops. As we've known since we planted our first tomatoes in the backyard, excessive dry spells are bad for crops. Since severe heat in the nation's heartland is not forecast from now until the end of August, we should expect our farms to be more bountiful. So agricultural investors should anticipate greater supply, and with increased supply comes lower prices.

Corn prices are a prime example of where the market may be heading in the near future, because of better weather. Corn has plunged 20% in the past month, driven lower by ideal growing weather in the U.S. Corn Belt, and a big drop in oil prices. Corn had soared to nearly $8 a bushel in June as the Midwest was ravaged by floods, but the return to warmer, dryer (but not too dry) weather has revived crops, and corn is now down to $6 a bushel.

Agricultural indexes may also fall on speculation that investor demand for agricultural commodities may decline as global equity markets rise and energy prices fall from their highs. In fact, investors are already starting to shift their positions. According to Bloomberg News, hedge fund managers and other large speculators cut their net-long futures position by 11% in Chicago corn futures in the week ended July 15. Index funds that invest in a basket of commodities cut net long positions by 2.3%. Hedge funds and other large speculators also cut net-long positions in soybean futures by 0.4%, in the week ended July 15, also according to Bloomberg.

Furthermore, cotton, a major agricultural market, is down more than 7% in July alone, but that's a typical summer pattern, reflecting lower demand. Prices from now until year end may rebound if the weather becomes too hot and dry in India, a major cotton-growing country, or in the growing regions of the U.S., such as Texas, the largest cotton-producing state.

There's one other issue that might suggest further downward sledding in the agricultural markets. Agricultural futures may be the most vulnerable of the U.S. commodity markets to proposed limits on speculative trading that are being considered by the government.