Speculators now messing with world hunger!!!

Discussion in 'Economics' started by S2007S, Jan 7, 2011.

  1. S2007S


    Great article on whats going on behind the scene with speculators once again playing the same game. This has nothing to do with supply and demand, just like when oil was climbing to $150 a barrel it didn't either, it was all speculation driven just like it continues today with the prices of sugar, cotton, and the rest of the commodities that trade in the futures market. Its become nothing but a game for the greedy fucks who want to make as much as they can speculating on something that should not be speculated on since over 6 billion people rely on the importance of food. This is a sad world!

    Are Speculators Adding to World Hunger?
    CNBC.com | January 07, 2011 | 02:01 AM EST

    The latest big trade to profit from is agriculture. But with international food prices hitting record highs, campaigners are furious and it is adding to a regulatory zeal.

    "Food isn’t an asset, it’s a basic human need," says the World Development Movement’s Heidi Chow. "The (futures) market was set up for farmers and food producers to hedge risks inherent in what they do. Betting on the price of food is having a catastrophic effect on the lives of millions of people in developing countries – or even those on low incomes in the U.S. and UK."

    But are speculators really driving prices to artificial levels?

    It’s clear the amount of money invested in long-only indices for agriculture – along with energy and metals - has rocketed. But that’s not necessarily the same thing as physical demand for these commodities.

    "For every long there is a short; for everyone who thinks the price is going up there is someone who thinks it is going down; and for everyone who trades with the flow of the market, there is someone trading against it," wrote Professor Tom Hieronymus.

    50 years on, the current Professor of Agriculture Marketing at Illinois takes up the ‘zero-sum’ market argument.

    "A very large number of futures and derivative contracts can be created at a given price level. In theory, there is no limit," writes Professor Scott Irwin. "This is another way of saying that flows of money, no matter how large, do not necessarily affect the futures price of a commodity at a given point in time.

    "In order to impact the price in the cash market, index investors would have to take delivery and/or buy quantities in the cash market and hold these inventories off the market," he tells Econbrowser.

    But America’s most powerful regulators are more pragmatic. Bart Chilton is one of five voting members on the US Commodity Futures Trading Commission. He takes the 2008 spike in prices as his starting point: "$200 billion of speculative money came into the market; institutional holdings, hedge funds, pension funds. We got extraordinary high prices. But there are now more speculative positions than in 2008 – we now have the highest speculative positions in history."

    "Some people are arguing that we are seeing ‘delinked’ prices – prices ‘delinked’ from true demand and supply – sugar, cotton, cocoa & coffee. I’m not an economist. I can’t say what percentage is due to speculation. But it’s easy to find evidence that they are having an impact.," concludes Chilton.

    At the World Development Movement, Heidi Chow is campaigning for tighter regulation of any speculation in staple foods.

    "We want all food derivative trades to go over public and transparent exchanges, and not Over The Counter (OTC) where bankers strike private deals with no disclosure and in secret. We want position limits set so that hedge funds and investment banks can’t speculate excessively," Chow says.

    Some of Chow’s hopes may soon be realized in the United States. Commissioner Chilton expects to push again next Thursday for his agency to vote to limit speculative positions to 10 percent.

    That’s 10 percent, regardless of whether it’s held on regulated markets or the vast pool of OTC contracts. And it's not just swaps and futures for agriculture, but energy and metals as well.

    The CTFC had to design new rules anyway under the Dodd-Frank financial overhaul. "Before the new law we had some authority, now we are mandated to do it. Limits will be in place. It’s just a question of when," says Chilton.

    Two Republicans on the CFTC have vetoed action for fear it could damage the market. Chilton says, however, that a 10 percent limit will only really effect the biggest of the large banks. But the scale of positions that might have to be liquidated are enormous.

    "In September in silver we had on trader with 35 percent of the regulated market. In natural gas or crude oil one trader can hold greater than 20 percent," says Chilton. ‘We regularly see a much higher percentage than will be permitted in wheat, corn, sugar.

    "As regulator, our job is not to come in as the Fire Service, picking over charred remains," he adds. "Our jobs is to act like Police – to prevent and deter fraud and manipulation."
  2. You obviously don't get it.

    Deflation is bad. Inflation is good.

    Inflation is what we need.

    All the economists agree except some loony gold bug youtube favourites.

    Food speculators are helping the world coming out of it's slump.

    You don't want a rerun of the 1930's deflationary bust do you?
  3. Anyone have some good links to this?
  4. I have an idea - to punish these evil speculators who are obviously the cause of all of the world's problems, we should impose some sort of "transaction tax" to steal more of their money. Why has nobody thought of this yet?

    Better yet - we should just abolish markets altogether! That way these dirty speculators will have no playground to destroy the Earth.
  5. TGregg


    Peak food! PEAK FOOD! AAaaaiiieeee!

  6. rew


    You're the fool who wants to be impoverished in your old age. Gradual, steady deflation is a good thing. I never heard anybody complain that computer prices got cheaper decade after decade.

    Why should I want food and energy to get more expensive?

    None of this has any bearing on whether speculators are driving up prices. If they are driving them up more than is warranted by long term supply and demand the market will punish them severely enough in due time, there's no need for politicians to get involved.
  7. Some people are arguing that we are seeing ‘delinked’ prices – prices ‘delinked’ from true demand and supply

    This article speculates about the speculators.

    I'd rather have price de-linked by speculators than by politics.

    President Lyndon Johnson got mad that egg prices were too high, and told the surgeon general to dampen demand by warning about the hazards of cholesterol in eggs.
  8. and the main stream media news says the cause is bad weather and too much demand.

    were in a recession...people are eating less. demand for clothing is crashing. yet cotton prices rise.

    it's all the fault of the US FED quantitative easing.

    the US financial markets is the headquarters to determine world prices for everything including oil and commodity prices...the prices set in wall street effects main street. so this commodity market or market is NOT A GAME. wall street treat the market is one big game..it's not freaking game homey. if you want to 'play games' go to the casino or play another game.
  9. Illum


    Deflation happened to farmers in the 30's. It was not good. They want to earn a living. I don't blame them.
  10. reason food prices are or have been low is gov't give subsidize to farmers so their is lots of supply and food prices low.

    and the gov't subsidize farmers in many countries. to produce locally grown food.

    in third world countries people spend 50% of net income for food.

    there is no free lunch..qantitative easing is no free lunch.

    the fed is essentially printing counterfeit money at mint condition and lend it to wall street crooks like goldman sachs for 0% interest. any fool can make money with 0% trading the markets. where most people pay 7% and corproations pay 7% and mortgage rates are 6%

    there is no 1% interest rate for the average joe..banks are tightening credit for consumers and business too.

    #10     Jan 7, 2011