http://stephenleahy.net/2011/02/28/rampant-speculation-inflated-food-price-bubble-wall-stgrain-traders-pushing-price-rises/Billions of dollars are being made by investors in a speculative “food bubble” that’s created record food prices, starving millions and destabilising countries, experts now conclude.
Wall Street investment firms and banks, along with their kin in London and Europe, were responsible for the technology dot-com bubble, the stock market bubble, and the recent U.S. and UK housing bubbles. They extracted enormous profits and their bonuses before the inevitable collapse of each.
Now they’ve turned to basic commodities. The result? At a time when there has been no significant change in the global food supply or in food demand, the average cost of buying food shot up 32 percent from June to December 2010, according to the U.N. Food and Agriculture Organisation (FAO).
(more, much more)
The standard explanation for the rise in the price of food (as pushed by the Oil industry and their minions) is the well known boogie-man, ethanol. Ethanol does impact the price of corn but corn represents about 1.6% of the retail price of all food (note petroleum related costs represent about 6%). That's because Farm Commodity prices are about 11%-12% of the retail price of food and corn is about 14% of the aggregate market value of all farm commodities.
And regarding Corn, let's take a look at what happened to corn over the last year. The price of corn went up about 100% from June-July 2010 and June-July 2011. NOw how much increased demand for corn came from the Ethanol industry's demand for corn to make ethanol? Well, the ethanol industry increased its demand for corn about 7% over that time period. But how much is that increase in demand for corn AS A PERCENTAGE OF CORN PRODUCTION IN OVER THAT PERIOD....? Well, that comes out to be 4%...yup - the increased demand for corn to make ethanol 2020 -2011 turned out to be 4% of the corn production for that period.
Now, really does anybody think a 4% increase in demand for a commodity (as a percent of its production) could cause a doubling in the price of that commodity??
As of Sept. 2011 the number of contracts for corn futures held by
speculators was more than TWICE the number of contracts held by
commercial traders (entities in the food business who will actually take delivery of the commdodity which they will use in their normal business operations).
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