Wall Street Is Betting on the Farm

[Herman Munster]

http://www.nytimes.com/2007/01/19/business/19futures.html?_r=1&oref=slogin

CHICAGO, Jan. 18 — Wall Street commodity funds that have been investing heavily in energy futures are now loading up on agricultural commodities like corn and livestock futures.

The flood of investment has raised concerns among grain traders and agricultural producers that speculative money is gaining an undue influence over their markets, which help set the prices of raw commodities for a host of consumer food products.

A recent study by the Commodity Futures Trading Commission, which oversees the nation’s futures markets, has found that Wall Street commodities index funds — investments in futures that track the underlying commodities of a particular index — have a much heavier concentration in agriculture futures markets than many had expected.

The commission found the Wall Street funds control a fifth to a half of the futures contracts for commodities like corn, wheat and live cattle on Chicago, Kansas City and New York exchanges. On the Chicago exchanges, for example, the funds make up 47 percent of long-term contracts for live hog futures, 40 percent in wheat, 36 percent in live cattle and 21 percent in corn.

“These are jaw-dropping numbers,” said Dan Basse, president of AgResources, an agricultural research firm in Chicago. “We have seen this explosion of open interest in agricultural commodity trading, and now we know it is largely related to the commodity index funds.”

[leveymg]

1. That's what happened during the 1970s as inflation set in and took off

Most of it was traceable back to the deficit spending for the Vietnam War.

Expect $5/gal gas and $5 for a loaf of bread (and I don't mean the gourmet variety). They will rise together.

[liberal N proud]

3. But some will blame it on the rise in the minimum wage

[leveymg]

6. The Investor Business Daily crowd sure will.

Paleotroglodite capitalists.

[Double T]

2. So STOP eating ANYTHING with corn, corn sweeteners, corn syrup.......

and any livestock and the wall street commodity manipulators and 'traitors' will eventually go away.

[enki23]

5. as if they couldn't do the same damned thing with organic lentils

[Double T]

7. They probably will, and so it goes...........

looks like we'll have to change to an AGRARIAN subsistence culture to defeat THEM.

[mmonk]

4. I believe the market just came out with commodity ETFs.

This may be what you're seeing. Now average Joe Blow investors can buy different ETF's and spread their risk around in different commodity sectors without having to trade in commodities. Brokers are probably pushing them.

[trof]

10. Yep, Powershares DBA is the ETF.

The new PowerShares fund tracks an agriculture index. The index is divided equally among wheat, corn, sugar, and soybeans. Deustche Bank runs it, and the official web page is linked below.

There are many reasons why these commodities should be much higher, but right now, only two matter:

1) Agriculture has been in a horrible bear market and now it's going up for the first time in years.

2) All those people who ever wanted to buy agriculture but weren't able to can now simply buy DBA through their regular broker!

DBA rose 8.7% in its first six trading days... and then fell 4% yesterday. I think this agriculture bull market is just getting started. Now, we have a way to play it... there's no reason not to be invested.
http://www.dailywealth.com/archive/2007/jan/2007_jan_18.asp

For what it's worth.
:shrug:

[Robbien]

8. Hedge fund betting always drives up the cost of the commodity

Because these yahoos are playing around places bets on food items, the price of those food items are going to skyrocket for consumers.

[DemReadingDU]

9. morning kick