Playing with Food: The Scalpers of our Daily Bread

As food prices reach record highs, how much is the speculation in agricultural commodities to blame?

Felicity Lawrence
UK Guardian
June 3, 2011

With food prices reaching record highs again this year, what goes on inside a 650ft Chicago skyscraper topped by a statue of the goddess Ceres is coming under intense scrutiny.

It is here that the world’s oldest futures and options exchange, the Chicago Board of Trade (CBOT), was established in 1848 to serve the great grain belt that had opened up in the American midwest. And it is here that the international price of agricultural commodities is set to this day.

“There’s a lot of weather in the market, the northern growing season has been traumatic, with drought in Europe and China and tornadoes and floods in the US. No one is panicked yet, but any additional crop loss, say in Russia, will quickly bring new worry to the market and that could quickly turn to panic. We may be one more event away from panic,” Dan Basse, president of AgResource, one of Chicago’s most respected commodity analyst companies, warned as we watched the opening of a day’s trading last month.

G20 agriculture ministers will meet in Paris on 22 June to discuss food security and prices. Speculative activity and how to contain it is high on their agenda.

Debate has been raging since 2008, when price rises provoked riots around the world, about whether or not the new money that has flooded into the commodities markets since 2003 is the cause of the problem – and if so, how to regulate it.

In Chicago, before the financial day begins, teams of traders pump themselves up outside on chain-smoked cigarettes and outsize McDonald’s coffees. The coloured blazers they use to make themselves easily identifiable on the trading floor have been reduced to bright jackets with string-vest backs to counter the heat generated by a day’s speculation. They keep on their toes in training shoes.

Inside, when the bell announces the start, there is a frenzy of noise. Traders yell at one another and wave their arms in violent gesticulation, palms out to signal sell, palms in to signal buy. There are “scalpers” who buy and sell within seconds, “floor brokers” hedging for corporate accounts, and hundreds of runners rushing orders to the recorders.

At the end of May, the price of corn was up again – most traders and analysts expected it to continue rising along with other commodities.

Basse is one of those who thinks underlying fundamentals – a serious mismatch between supply and rapidly growing global demand – are behind this year’s price rises.

“Speculation is the easy thing to point the finger at and it’s easy to fix. Back in 2008, when prices were up and there was lots of money pouring in, that may have pushed prices up, but today we don’t see that as having a significant effect,” Basse said.

“Look at growth in world livestock demand and in biofuels demand, and you can see what’s been driving the agricultural bull market.”

He painted a troubling picture of what is likely to come. He estimates the world needs to bring around 10.3m hectares of new land a year into food production “just to keep stocks steady”, but he says that will be increasingly hard to do as the land that remains available is reduced to what is environmentally fragile.

A “weekend” farmer of GM crops himself, Basse admits the promise that biotech seeds would deliver big increases in yields has turned out to be illusory. He also fears that “superweeds are coming on so fast with GM that US farmers are going to have to go back to more traditional cultivation methods [as opposed to the practice with GM seeds of not tilling the soil and simply spraying to control pests] – but they don’t have the capacity to do that.”

Europe, Basse said, will soon have no choice but to lift its ban on imports of GM crops for animal feed. With its own crops suffering drought, it will have to turn to Brazil, the only major supplier of non-GM imports. However, the Chinese have already bought up large chunks of the Brazilian crop. The policies in the US and the EU of promoting biofuels will be unsustainable.

The company that owns CBOT, the Chicago Mercantile Exchange group (CME), also rejects the notion that the enormous rise in speculation in agricultural commodities in recent years has caused food price rises.

Farmers and processors of physical goods have long used commodities exchanges such as Chicago’s to hedge against risks such as bad harvests. Speculators willing to take the risk perform a useful role in providing liquidity. But much of the recent growth in speculation has been through new “structured” products invented by banks and sold to investors.

After intense lobbying, banks won deregulation of commodities markets in the US in 2000, allowing them to develop these new products. Goldman Sachs pioneered commodity index funds, which offer investors a chance to track changes in a spread of commodity prices including key agricultural commodities.

Between 2003 and 2008, investment in commodity index funds rose from $13bn to $317bn (£193bn). But the CME’s head of product development, Fred Seamon, said: “There is no credible evidence that suggests index funds or any group of traders are a cause for high prices or increased volatility. There may be a correlation, but that’s a completely different thing.”

CME argues that the volume of speculation is not a problem, because the overall composition of the agricultural commodities market has not changed; the increase in activity by index funds has been matched by an increase in trading by those who are commercial participants, that is those who have a direct interest in the physical goods.

“That’s an indefensible position,” Chicago–based hedge fund manager Mark Newell of Quiddity retorted. He and another hedge fund manager, Mike Masters, prepared testimony to the US Senate when it was looking into the effect of speculation on food prices in 2008.

“When billions of dollars of capital is put to work in small markets like agricultural commodities, it inevitably increases volatility and amplifies prices – and if financial flows amplify prices of food stuffs and energy, it’s not like real estate and stocks. When food prices double, people starve ,” Masters said.

The UN rapporteur on the Right to Food, Olivier de Schutter, added his weight to Masters’ side of the debate at the end of last year when he concluded a speculative bubble was responsible for a significant part of the food price rises.

An OECD study, however, did not find a link. Aid agencies such as Oxfam and Christian Aid are calling for reregulation.

In the US, the regulator – the Commodities Futures Trading Commission – has until July to produce a new framework for the commodities markets for Congress. It has been looking at imposing limits on the size of positions that traders can take, and at regulating the commodity index fund trades that are currently unregulated because they take place “over the counter”; that is, between investors and banks. But the financial industry has proved resistant to reforms. G20 ministers will have to decide their own position soon, too.

Newell, meanwhile, remains convinced that without action prices will continue to go up, partly because of underlying fundamentals, but also because, just like in 2008, “the game’s afoot again”.

Rothchild Engineer Giving Away UK Infrastructure to Foreign Corporations

PrisonPlanet.com

The Rothschild banking family is pushing for the privatization of the UK’s motorway network that would force Brits, who already pay road tax, to enrich the coffers of private corporations intimately tied in with the Rothschilds by means of road tolls and pay-by-mile schemes enforced with spy cameras.

“A plan to privatize the UK’s motorway network, giving toll firms access to large swaths of road, would take place under the guise of paying down the government’s debt, British media reported Tuesday, citing a number of key officials who support the scheme, proposed to all major political parties by NM Rothschild, one of the world’s oldest, most influential and little discussed investment banks, founded by the Rothschild family,” reports Raw Story.

Both Transport Secretary Philip Hammond and Business Secretary and UK Treasury Spokesman Vince Cable have signaled that the scheme will go ahead, formally handing over Britain’s infrastructure to transnational corporations and offshore banks at the behest of the most insidious gaggle of globalists ever to walk the earth.

The Rothschilds are perhaps the most larcenous banking family in history, a dynasty that has routinely made vast fortunes from economic collapses it personally engineered, such as the massive London stock market crash during the battle of Waterloo.

In June 1815, Nathan Rothschild, after being told by his agent that Wellington had defeated Napoleon at Waterloo, immediately dashed to London and ordered his agents to dump consuls. This triggered a selling panic, with traders believing that Wellington had lost. Only when stocks plummeted and could be bought for a song did it emerge that Wellington had in fact won, something that Rothschild knew all along, and by this point his agents had bought up cheap stocks for next to nothing. The stock market soared again and the Rothschild family made obscene profits, enabling them to become the richest family in the world.

This gargantuan Rothschild ploy was documented in the excellent documentary, The Money Masters. Watch a clip below.

The UK government is now laboring under record deficits and indebted to the same central bankers who control the country through the Bank of England, originally named the Company of the Bank of England, which was controlled by Nathan Rothschild, who once stated, “I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain’s money supply controls the British Empire, and I control the British money supply.”

Rothschild family members have wielded significant influence over the Bank of England through their service on the Bank’s Court of Directors over the years.

“The bank was behind many of the key privatisations of the 1980s and 1990s, including British Steel, British Gas and British Coal. It has close links to the Conservatives, having employed several senior Party figures including Lord Lamont, John Redwood and Lord Wakeham. Oliver Letwin, the former shadow chancellor, works there part-time,” reports the London Times.

Rothschilds have had significant influence of the British government in recent years through their close relationship with recent Business Secretary and influential Bilderberg member, Lord Mandelson, who is routinely photographed cavorting around with Rothschild family members on private yachts and in sports cars in luxury holiday resorts. Mandelson is widely loathed in Britain as a snobbish elitist and was forced to resign from the government on two separate occasions having been involved in numerous cover-ups and scandals, but just seems to keep getting back into power in one way or another.

Britons already pay road tax as well as local council tax which is supposed to go towards the cost of maintaining roads and motorways, but will be forced to pay even more on private-owned toll roads if this scheme goes ahead, having their living standards reduced yet further as a fresh wave of tax increases for the “middle class” is readied by the new government. The “middle class” is defined as anyone barely scraping a living, since the hikes will affect people who earn just £20,000 a year.

Critics have labeled the move a “shadow toll” and predicted a public backlash, which is a good thing because Brits will finally start to realize that it is private central bankers, and not puppet politicians who really control the country, and that internationalist crooks are selling Britain’s infrastructure to their offshore affiliates who will then reap the rewards from Brits being charged to use the roads they already pay for through a myriad of other taxes.