THe experts are baffled why the futures (or derivatives) market prices are higher than the cash market prices (where the buyer actually wants the commodity). It only reason this "baffles" the experts is because those in the brokerage/financial community are reluctant to point the finger at speculators. Speculators do provide income to the facilitators to these trades, the brokers who have access to these markets.
This is happening not just with corn (the feed-stock to the
evil Ethanol molecule) but with wheat and soy-beans too. Gosh could the cause be something other than the molecule that devoured the food supply - ETHANOL (AAAAAUUUUUGGGGGHHHHHHH!!!!!)
http://www.iht.com/articles/2008/03/27/business/commod.php?page=1Whatever the reason, the price for a bushel of grain established in the public derivatives markets has been substantially higher than the price of the same bushel of the same grain at the same moment in the cash market
(that is, the market where the buyer actually wants the grain and will take delivery of it.__JW).
When that happens, no one can be exactly sure which price accurately reflects supply and demand in these crucial commodity markets, an uncertainty that can influence food prices and production decisions around the world. Prices set in the U.S. markets are used as benchmarks for grain prices globally.
These disparities also raise the question of whether farmers, who rely almost exclusively on the cash market, are being shortchanged by cash prices that are lower than the derivatives market says they should be.
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The veteran traders and many farmers blame the new arrivals in the commodities markets - hedge funds, pension funds and index funds. These investors and speculators, they complain, are distorting futures prices by pouring money into the market in pursuit of strategies that are insensitive to traditional market signals.
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On edit:
For the record, it's not just speculators, but the economy going down the tubes that caused investors to get out of stocks and into commodities of every sort (speculators then seek to profit from the observed trend thus exaggerating it, making it worse.). Then there is the primary cause, the growing demand for food from nations such as India and China growing in wealth who are demanding more food, energy and manufactured products. That brings us to the exploding cost of energy which affects just about everything. Oil is currently priced 2.5 times its price in January 2007
http://tonto.eia.doe.gov/dnav/pet/hist/wtotopecw.htm biofuels have played a part in climbing food prices but its a relatively small player in this scene. If somehow you could make the ethanol molecule dissappear over-night, the price of all grains would not come down magically the next day, sad to say. The cost of gas and diesel would just go up even faster and the cost of everything else would rise with it.