WTO Think: Bush Commodities Commission Claims `No Speculation in Food Crisis'
April 22 (EIRNS)U.S. farmers are starting to see the dark side of the bubble in their products' pricescash margin calls that can run into the many tens of millions of dollars for a single farm cooperativebut the Bush Administration today told them not to worry, there is no speculation in food!
The Commodity Futures Trading Commission (CFTC) held a day-long, packed hearing in Washington today to let farm groups blow off some steam about wild hedge fund speculation in agro-futures markets (wheat, corn, hogs bellies, etc). But the CFTC and Agriculture Department chief economists' testimony claimed that only free trade supply and demand, not futures and derivatives speculation, was driving the food price spiral.
The CFTC was sending a signal that the Cheney-Bush White House, rather than take regulatory action, would let food commodity markets break down and stop functioning entirely, amidst the global financial disintegration.
Everyone involved in commodities marketsincluding the farm producer groups at the CFTC hearingknows that since the global financial markets crashed last Summer, huge flows of speculative capital managed by hedge funds have flooded the markets for food and metals futures, overwhelming those relatively small markets. The futures price of rice has doubled in two months, for example; futures prices for grains as a whole have doubled since last July.
Very bad for eatersgood for farmers? Not now: They are losing the ability to tell what the price of their produce is. The grain or rice elevator companies through which farmers have sold their produce for generations, are refusing to make future purchases because of the unprecedented volatility of prices, and because the elevators depend on credit which banks are refusing to extend. Several such "country elevators," as they are called, have shut down in the past few months.
Farm producers are increasingly being forced to wait for harvest and make a cash sale to food marketing conglomerates like ADM or Cargill. There is no other recourse. And that cash sale price often has no relation to the "futures price" for that month which the farmers looked up on the Chicago Board of Trade or other futures market.
When the farm co-ops try to "hedge" that problem by buying their own futures and optionsrather than through the elevator operatorsthey start to get stiff margin calls, demanding cash, when the prices of their product jump up. Essentially, they wind up buying their own crops at higher prices than they will be able to sell them!
Metals industry sources say that exactly the same thing is happening on their futures markets, where international demand is clearly not rising in a world economic depression.
In the food market crisis, City of London mouthpieces like the Economist and Financial Times have been fiercely denouncing those nations which have gone for national food self-sufficiency, controlling exports and regulating prices. But that's the direction the U.S. Congress will have to go, overruling the White House free-trade lunatics.