Posted on 04/23/2008 4:39:04 PM PDT by kiriath_jearim
WASHINGTON (AP) - Federal regulators on Tuesday said placing tougher restrictions on agricultural commodity trading will not alleviate high and volatile prices in those markets, and could make matters worse.
Farmers, ranchers and grain processors met with regulators in Washington to discuss the causes behind turbulent markets and historically high prices for wheat, corn and other foodstuffs.
Farmers and food producers argue speculation by Wall Street investors -- not a supply-demand imbalance -- is what's driving up prices and volatility, making it harder for commercial buyers and sellers of grain to use the exchanges as a tool for limiting the risks of price uncertainty.
In the past year, prices for corn and cotton have ballooned roughly 50 percent and 65 percent, respectively, according to industry officials.
"The market is broken, it's out of whack and someone needs to step in and give some relief to cotton producers," said Billy Dunavant, president of cotton producer Dunavant Enterprises.
"For those who say everything is all right, I'm sorry, maybe I'm wasting my time, but there are problems and it's incumbent on us to try and solve them," said Tom Buis, of National Farmers Union.
But commissioners from the Commodity Futures Trading Commission cautioned against blaming speculators, saying current market conditions can be explained by a weak dollar, small inventories due to poor weather and higher transportation costs.
The agency's chief economist Jonh Fenton said trading by institutional investors has been relatively stable throughout the price gains seen in the past two years.
In their opening comments to participants, the agency's four commissioners showed little enthusiasm for setting new restrictions on speculation to attempt to calm commodities trading. Cotton and corn industry representatives called for stricter oversight of the speculative positions hedge and pension funds can take on commodities.
The American Cotton Shippers Association said funds should have to report their cash positions to regulators on a weekly basis, to ensure they do not exceed federal limits.
"Your suggestions may alleviate your particular problem, however individualized solutions may cause bigger problems for the market as a whole," said Commissioner Michael Dunn. "There is not a silver bullet or single solution to address the problems we are currently facing." Dunn encouraged food producers and speculators to work together to ensure markets function properly, rather than pushing for more regulation from the government.
This is the same game that’s just been played with oil and gold.
Notice the pattern???
Now that the bubble created by speculators in oil and gold is starting to “pop”, where is the new “hot” money going to go?
Just like the movie “Wall Street”, where Gordon Gekko tells Bud Fox to start buying Anacott Steel, and only after Bud has bought his position does he give a little taste out to his friends. After that, he calls the media and tells them that Annacott Steel is in play.
The speculators have already bought their position in agriculture products. Then they give out the taste to their friends (other speculators) and after the agriculture products start to rise dramatically, they then call the media to complete the final speculative frenzy.
The hype then gets the last people to come jumping into the market, so the early birds can sell their very profitable positions to the last of the speculators.
Just like the oil, gold and dollar “crisis” is now subsiding, miraculously here comes another one in food, right on it’s heels. How AMAZING.
So what if people around the world starve or if you are paying $4.00 for gas. Do you think the speculators care?
Just my two cents worth.
They don’t call it a “squeeze” for nothing. Billy D. needs to suck it up.
“But commissioners from the Commodity Futures Trading Commission cautioned against blaming speculators, saying current market conditions can be explained by a weak dollar, small inventories due to poor weather and higher transportation costs.”
And, of course, this does not preclude it’s mostly “speculators.”
The Commissioners are doing well. They’ll get their bribes “on the back end” with later appointments to cushy Goldman Sachs, etc. jobs.
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