Speculators Making Killer Profits Off Midwest Flooding While Farmers Can't Sell Grain
June 16, 2008 (EIRNS)This morning's frantic speculation on the Chicago Board of Trade (CBOT) opened with corn (December futures) up 19 cents, for a record $8.06 a bushel (contrast to $4 a year ago); and new crop soybeans hit a record $15.53 a bushel (contrast to $8 a year ago). This is the 12th consecutive day for record-setting corn prices on the exchange, occasioned by binge-speculation off the likely destruction of at least 5 million acres (2 million hectares) of crops in the Midwest flood zone, including at least 3 million acres of corn (out of 86 million nationally).
The volume of grain and soy trading contracts is soaring on the CBOT, part of the Chicago Mercantile Exchange (CME). All futures trading has risen 26 percent over the first part of 2008 on the CME, compared to same time 2007 (including non-commodity futures of all kinds). The Commodity Futures Trading Commission (CFTC), the Federal agency which could stop the deadly game, but will not, released a report June 13, showing huge flows of funds going into the corn market. The CFTC report gives specifics on the record volumes of outstanding corn commitmentsamounting to paper bushels, the way paper barrels exist in oil speculation. The CFTC says that speculative funds have added 34,732 contracts to their long positions and cut 4,588 contracts from their short positions, putting them net long on 219,041 corn futures contracts. Index funds are now net long on 427,352 contracts.
At the same time, prices are falling for the farmer trying to forward-sell his corn or soybeans to his local buyer. There has been a 12 cent drop in the prices offered to farmers for their corn over the past 24 hours! This comes on top of an average 4 cent a bushel drop in prices to the farmer last week in the Cornbelt, according to a spot check of local grain buyers, by Dow Jones. This farmer price disparity with the exchange prices, reflects not only the physical destruction of shipping and processing infrastructure, but also the fact that whenever prices spike on the Chicago Board of Trade, the local grain elevator or buyer is hit with a margin call, that he now cannot meet. So he is not offering farmers forward-contracts. Many local terminals, strapped for cash, have gone bankrupt, or sold out to the wave of hedge and index funds now on a buying spree for hard infrastructure, with which to further hold and hoard grain. E.g. WhiteBox, based in Minneapolis. The cartel terminals, dominated by Cargill and ADM, started denying forward contacts to purchase farmers' grain months ago, under the principle: protect yourself, screw the farmer. The cartel firms offer the farmer take-it-or-leave-it prices, and terms of delivery.
On top of this, key grain and meat processing facilities are shut down by the flood all over the Midwest, for example, a huge ADM corn-processing plant in Cedar Rapids.