The Role of Speculators in the Global Food Crisis
Biofuels and global warming have been blamed for shortages driving up the price of food, and both trends have played their role. The planet's grain reserves are almost empty for a number of reasons, including global population growth and greater prosperity in some countries like India. Feed corn is in short supply because industrialized nations have used it for ethanol. Droughts -- in Australia, for example -- have devastated rice and wheat harvests. Wheat reserves worldwide are only sufficient right now to cover about 60 days of demand. This helps to explain why commodity prices have rallied since early 2006, with the price of rice ballooning 217 percent, wheat 136 percent, corn 125 percent and soybeans 107 percent. But classic supply and demand theory offers only a partial explanation. Sudden price hikes since last January have been alarming. The UN estimates that at least $500 million (€312 million) in immediate aid will be needed by May 1 to avoid serious famines. Agricultural scientists at the world body's Educational, Scientific and Cultural Organization (UNESCO) have presented a report on the world food crisis. And criticism is growing that hedge funds, index funds, pension funds and investment banks bear part of the blame.
Greg Warner has worked in the grain wholesaling business for more than two decades. His office sits a block away from the Chicago Futures Exchange. He's an analyst with the firm AgResource, and he says what is happening now in the wheat market is unprecedented. "What we normally have is a predictable group of sellers and buyers -- mainly farmers and silo operators," he says. But the landscape has changed since the influx of large index funds. Fund managers seek to maximize their profits using futures contracts, and prices, says Warner, "keep climbing up and up." He's calculated that financial investors now hold the rights to two complete annual harvests of a type of grain traded in Chicago called "soft red winter wheat." Wagner is stunned by such developments. He sees them as evidence that capitalism is literally consuming itself. The Role of Speculators in the Global Food Crisis
Greg Warner has worked in the grain wholesaling business for more than two decades. His office sits a block away from the Chicago Futures Exchange. He's an analyst with the firm AgResource, and he says what is happening now in the wheat market is unprecedented. "What we normally have is a predictable group of sellers and buyers -- mainly farmers and silo operators," he says. But the landscape has changed since the influx of large index funds. Fund managers seek to maximize their profits using futures contracts, and prices, says Warner, "keep climbing up and up." He's calculated that financial investors now hold the rights to two complete annual harvests of a type of grain traded in Chicago called "soft red winter wheat." Wagner is stunned by such developments. He sees them as evidence that capitalism is literally consuming itself. The Role of Speculators in the Global Food Crisis
posted by temporal at 4/23/2008
0 Comments:
Post a Comment
<< Home