[lbo-talk] Food Prices Again

Peter Fay peterrfay at gmail.com
Wed Feb 16 16:34:23 PST 2011



>From your lips to Goldman Sachs' ears.

Perhaps you know something the FAO doesn't:

"FAO identified a number of possible causes contributing to the [food] price rise [...] most importantly, government export restrictions, a weakening US Dollar and a growing appetite by speculators and index funds for wider commodity portfolio investment on the back of enormous global excess liquidity." - http://www.fao.org/docrep/012/ak341e/ak341e00.htm

And the EU:

"Speculation in commodity derivatives has been "scandalous" and needs to be regulated carefully, the European Union's nominee for chief financial watchdog said on Wednesday." And Merril Lynch: "So much speculation has crept into commodities markets, for example, that in April they were trading at prices 50% higher than they would have been based only on fundamentals, estimated Merrill Lynch."

http://www.businessweek.com/magazine/content/06_24/b3988004.html And the World Development Movement: http://www.wdm.org.uk/sites/default/files/hunger%20lottery%20report_6.10.pdf And the US CFTC which is changing its regulations, etc., etc. I guess in an ideal world where there were no cornering of the market, no monopoly pricing and no market manipulation, then there might be a use for hedging. But then, I'd also be the King of England.

On Wed, Feb 16, 2011 at 5:42 PM, Shane Mage <shmage at pipeline.com> wrote:


>
> On Feb 16, 2011, at 1:34 PM, Jordan Hayes wrote:
>
> Shane Mage writes:
>>
>> Any role of speculation in "running up prices" is absolutely
>>> offset by an identical role of speculation in "running down
>>> prices."
>>>
>>
>> That's not necessarily true. Higher prices can become acceptable and
>> normal, after the shorts have covered; higher futures prices can get "baked
>> in" by producers locking in a price.
>>
>
> Whoever knows the least little but about economics--any variety of
> economics--knows that prices are determined by the supply and demand
> functions relevant to the given market structure. If higher or lower prices
> get "baked in" and "acceptable" that means those were the prices that would
> come about irrespective of speculation (which of course has its role in the
> path taken by those price movements). "After the shorts have covered?" If
> the prices have risen, when the "shorts" (ie., half the speculators) cover
> they have lost more than the "longs" have won (the difference being the
> bank's vigorish).
>
>
>
>
> Those prices get passed along to the products that are made from the
>> commodities. For a speculator, there's no time limit: he can always roll
>> forward into the next contract[*].
>>
>
> Taking a loss [if long]whenever the prices have failed to rise enough or
> have actually fallen.
> Speculation is a zero-sum game, profitable on a net basis only to the
> "house."
>
>
>
>
> Shane Mage
>
> "All things are an equal exchange for fire and fire for all things,
> as goods are for gold and gold for goods."
>
> Herakleitos of Ephesos, fr, 90
>
> ___________________________________
> http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk
>

-- Peter Fay



More information about the lbo-talk mailing list