Food Commodities Trading

...is evil. Or good, in a way I guess, as the resultant inflation of food prices is stimulating remarkable losses of tourist revenue in Tunisia and Egypt and now their in-betweeny, Libya. Down with all dictators I say! (How are the food prices in Singapore BTW? Certainly the price for champagne brunch at the Ritz-Carlton has gone up heaps in the last few years!)

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Food Commodity Speculation Adds to Egypt Unrest Huffington Post.

While flooding in Australia, a drought in Russia and weak harvests in India and China are the fundamental drivers for this upwards trend, there is little doubt that investors and traders looking to diversify and capitalize on the supply shortages are moving these prices much more significantly and faster. Commodity index investment increased an estimated and whopping $80B dollars last year, bringing total long-only commodity index investment to $350B, according to Barclays. Another $30B of commodity ETF investment is also overwhelmingly long-only, as short commitment in these instruments is normally well under 5% of float.

WhateverTF that last bit means, the middle bit says essentially that it's Blythe Masters' fault. 1st. Wall. Up against.

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Indonesia to bring food commodity speculation issue in G20 Summit Xinhaunet

"We want the G20 forum to pay more attention on food commodity trading activities so as to eliminate the speculators and their business," Indonesian Financial Minister Agus Martowardoyo said in his office here, citing to part of agendas the Indonesian government brings in the upcoming G20 Summit slated to be held in Paris, France from Feb. 18 to 19.

If even Indonesia knows what going on, it must be bad!

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Food prices push millions into poverty Washington Post.

Rising food prices pushed tens of millions of people into extreme poverty last year and are reaching "dangerous levels" in some countries, World Bank President Robert Zoellick said Tuesday as he released new data showing that the cost of grain and other staples is near a historic high.

Please ignore the embedded video there which tells poor Americans not to panic, it is not their end of the boat that is sinking.

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Of course not everyone agrees. Hell, we are talking economics here.

Paul Krugman: Signatures of Speculation NYT.

Many people on the “speculators did it” side like to point to financial data, especially large purchases of futures by various players. But food is a physical commodity, and plays in the financial markets can only move the price to the extent that they affect physical flows and stocks.

Normally I have a good deal of faith in Kruggers, but...

The UN Food and Agriculture Office reports say (partially paraphrased by a blogger quoted here):

In its 2009 Trade and Development Report, the United Nations Conference on Trade and Development (UNCTAD) contends that the massive inflow of fund money has caused commodity futures markets to fail the “efficient market” hypothesis, as the purchase and sale of commodity futures by swap dealers and index funds is entirely unrelated to market supply and demand fundamentals, but depends rather on the funds’ ability to attract subscribers….

The Groups recognize that unexpected price hikes and volatility are amongst major threats to food security and that their root causes need to be addressed, in particular:

a) The lack of reliable and up-to-date information on crop supply and demand and export availability;
b) Insufficient market transparency at all levels including in relation to futures markets;
c) Growing linkage with outside markets, in particular the impact of “financialization” on futures markets;
d) Unexpected changes triggered by national food security situations;
e) Panic buying and hoarding.
[My emphasis]

So... Which dictator is for dinner tonight?

E@L