Biofuels, Speculation Blamed for Global Food Market Weirdness

Pages

Biofuels, Speculation Blamed for Global Food Market Weirdness

Fuel instead of food was always a stupid proposal.

By Rightwingconspirator

Economy • October 2011 • Views: 1,058

wired.com

A new analysis of sudden rises in global food prices puts the blame on biofuel policy and mortgage-meltdown-style speculation, which may have fundamentally changed how food markets function.

Many other explanations have been proposed, and the latest analysis — a series of mathematical models and statistical evaluations that seem to match theory with real-world patterns — is not conclusive. But it does make a strong case.

Recent Pages by Rightwingconspirator:
Russia's New Combat Robots Blown Up by Drones Near Avdiivka Climate Scientist Michael Mann Wins Defamation Case Against Right Wing Hacks About That Flood Warning for Los Angeles? Coastal Serenity The Six Fingered Con Man

Jump to bottom

5 comments

Velvet Elvis Thu, Oct 6, 2011 10:24:58am

Am I the only one who finds speculating on food incredibly fucked up?

lostlakehiker Thu, Oct 6, 2011 10:59:40am

re: #1 Conservative Moonbat

Am I the only one who finds speculating on food incredibly fucked up?

Well, there is another perspective. If there were no speculation in food prices, then food would have to clear the market and be sold, then and there, for whatever it might bring. Holding food in storage is expensive. Producers don’t have enough information about probable future demand and supply to make sensible decisions about whether to store, or sell forthwith.

Without the possibility of speculation, mass storage of food, in anticipation of the possibility of a cyclone destroying a rice harvest, say, and the consequent runup in the price of stored rice, the world would not hold as much in the way of reserves. Who would shoulder the storage costs, if not speculators?

Perhaps, you will think, governments should keep stocks of food. That’s probably a good idea too, and some governments do. But there are so many things to think about: storms, drought, rising prosperity in China and India and a resulting increased demand for meat, pest control, oil embargoes and the effect on corn prices, and on and on. Governments don’t do that. They cannot get up to speed on all those variables. Speculators can’t either, not entirely. But at least they have skin in the game. If they get it wrong, they lose money.

Speculation in food is an institution designed to shift the risks to farmers, of having to sell a good crop into a down market, and the risks, to consumers, of having to buy when prices have soared, onto middlemen. The middleman takes a cut, makes a profit, and shoulders some of the inevitable boom and bust risk. If prices tank, the speculator may buy, sensing an opportunity to sell later at a better price. If prices soar, he can cash in, and, (and this is the point of the whole exercise) alleviate a shortage by releasing reserves of food that have been held back against the evil day.

So long as the market is properly regulated, (no fake food warehouses, that sort of thing) society may be the better, all in all, for the activities of speculators.

Political Atheist Thu, Oct 6, 2011 11:02:16am

re: #1 Conservative Moonbat

Am I the only one who finds speculating on food incredibly fucked up?

Nope. Count me in.

KingKenrod Thu, Oct 6, 2011 11:57:36am

re: #1 Conservative Moonbat

Am I the only one who finds speculating on food incredibly fucked up?

Speculation is absolutely necessary in modern markets to provide cost certainty. Without it you would see wild spikes in prices as well is massive recurring local and global shortages. You would also see generally higher prices for most commodities as suppliers have to price in risk directly.

Political Atheist Thu, Oct 6, 2011 1:01:36pm

re: #1 Conservative Moonbat

I did not read your comment as in absolutely no speculation, more like what we saw before we had all these odd securities and derivatives added to the existing sane market.

Did I read you right?

Auto

This page has been archived.
Comments are closed.

Jump to top

Create a PageThis is the LGF Pages posting bookmarklet. To use it, drag this button to your browser's bookmark bar, and title it 'LGF Pages' (or whatever you like). Then browse to a site you want to post, select some text on the page to use for a quote, click the bookmarklet, and the Pages posting window will appear with the title, text, and any embedded video or audio files already filled in, ready to go.
Or... you can just click this button to open the Pages posting window right away.
Last updated: 2023-04-04 11:11 am PDT LGF User's Guide RSS Feeds

Help support Little Green Footballs!