Tuesday, August 21, 2012

Germany: The politics of droughts

Der Spiegel

The Cost of Hunger Drought Only One Factor Behind High Food Prices

The severe drought in the US has been blamed the rising prices of agricultural commodities. But that is only part of the story: Biofuels, financial speculation and changing dietary habits are also playing a role. The global food supply faces pressure from all sides. By SPIEGEL Staff

Since the beginning of the agricultural crisis in 2008, there have been price surges that cannot be explained by normal factors. Market prices for rice, for example, sometimes shoot up by 30 percent in a single day.
Such movement is likely the result of financial market speculation. Investors, especially investment banks and pension funds, don't trade in real goods. They have no interest in physically owning corn, soybeans or wheat. By entering into futures contracts, they are merely speculating on changes in the prices of food commodities. Trading in agricultural commodity futures almost tripled between June and July.

Growing demand causes futures prices to rise, which ultimately affects the real market -- which is precisely the problem. Many studies show that futures contracts affect prices on real markets, and experts only disagree on how large the effect is.

Read it at Der Spiegel:

No comments:

Post a Comment