Wall Street Grain Hoarding Brings Farmers, Consumers Near Ruin

[Purveyor]

Source: Bloomberg News

April 28 (Bloomberg) -- As farmers confront mounting costs and riots erupt from Haiti to Egypt over food, Garry Niemeyer is paying the price for Wall Street's speculation in grain markets.

Commodity-index funds control a record 4.51 billion bushels of corn, wheat and soybeans through Chicago Board of Trade futures, equal to half the amount held in U.S. silos on March 1. The holdings jumped 29 percent in the past year as investors bought grain contracts seeking better returns than stocks or bonds. The buying sent crop prices and volatility to records and boosted the cost for growers and processors to manage risk.

Niemeyer, who farms 2,200 acres in Auburn, Illinois, won't use futures to protect the value of the crop he will harvest in October. With corn at $5.9075 a bushel, up from $3.88 last year, he says the contracts are too costly and risky. Investors want corn so much that last month they paid 55 cents a bushel more than grain handlers, the biggest premium since 1999.

``It's the best of times for somebody speculating on grain prices, but it's not the best of times for farmers,'' said Niemeyer, 59. ``The demand for futures exceeds the demand for cash grains.''

Commodity investors control more U.S. crops than ever before, competing with governments and consumers for dwindling food supplies. Demand is rising with population and income gains in Asia, while record energy costs boost biofuels consumption, sending grain inventories to the lowest levels in two decades.



Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aDZ...

[SpiralHawk]

1. Republicon 'family values' in action in the marketplace

Ptooey.

[whistle]

2. All those trillions in new money printed by the U.S. Federal Reserve

....and made available exclusively to Central Banks and Wall Street speculators tells the whole story now doesn't it

[Bonhomme Richard]

3. Is this basically withholding food to create a supply shortage,,,

Is this basically withholding food to create a supply shortage in order to increase profits?
Is it that simple?

[acmavm]

5. Whatever it is, it's downright immoral and indecent. I'm wondering

how they're getting away with it. If we had anyone in our government who had a conscience, they wouldn't.

WHERE'S OUR FRIGGING REPS???????????????

[underpants]

4. So the corn prices already protected by the Feds isn't high enough?

AM I missing something here?

We've already flooded the market with artificially low priced corn.

[muriel_volestrangler]

6. I don't understand why it's a problem for farmers

If people are buying and selling more grain futures than before, doesn't that mean there will eventually have to be more real orders for grain when the time comes for the futures contract to be honoured? The farmers may not get the inflated prices going around now, but they'll get more than they would have otherwise, surely.

[madrchsod]

9. the price of production is going up as fast as the price

if the farmer invests a million more this year and the market collaspes or it does`t rain they are screwed. the country is littered with failed speculators/grain elevator managers

[muriel_volestrangler]

13. True for the cost of seed

though I don't know enough about farming to know if the cost of seed varies exactly the same as the market cost of general grain. But any farmer will spend less on seed than they get for the harvested crop (unless there's a total crop failure), so a higher price should still benefit them in that case. And I can see that the cost of fuel is a problem - but this article seems to say that the specific price of futures in grain is a problem for them.

[Purveyor]

17. Here is an article that ran in our local Sunday paper yesterday discussing the cost issues:

High crop and land prices trigger spirited competition for ground

Sunday, April 27, 2008
Farmers this spring are tilling the most valuable soil in their lifetimes to raise grain worth record prices.

Still, recreational and development buyers continue to drive land prices in Jackson County, as they have for two decades.

Even with record grain prices, only a few farmers have ventured into the real estate market. At an average $3,450 an acre -- up $1,000 since 2002 -- few farms are trading hands.

``With the price of farm machinery, fertilizer and seeds, a farmer can't afford $3,500 an acre,'' said Tompkins Township Assessor Harold Mann.

The costs of nitrogen and diesel fuel -- the lifeblood of farming -- have quadrupled since 2000.

Land for farming use isn't worth much more than $2,000 an acre, Mann said.

High grain prices and soaring land prices have triggered spirited competition for rented farmland. It is good for landowners but yet another increase for farmers.

``We haven't had any competition for land, until this year,'' grain farmer Grover Bailey said while preparing to chisel-plow a field on Cooper Road. ``People came in on us and offered more for rent, so we had to pay more.''

Bailey owns 350 acres near his farmstead on Territorial Road and rents 1,200 acres as far as 15 miles from home. He lost some rented land and added some this year.

``All farmers are looking at holding their acreage or expanding,'' said Eric Wittenberg, a Columbia Township farmer and research specialist for Michigan State University.

---eoe---

http://www.mlive.com/news/citpat/index.ssf?/base/news-2...

[benld74]

7. This will become the next Sub-prime catastophy in the markets

[madrchsod]

10. -funny thing-- there were warnings last year that this would happen

[nvme]

8. food Oil and housing

This is just another example of how speculators are wreaking havoc on world economies. I am really not sure of the way to correct the situation but my intuition is telling me really bad times are coming. All the solutions will be found after the fact. It seems our economy is only basing itself of money management and not on actual production. I am really not sure why that is my impression I am ignorant to the ins and outs. I always welcome someone to break it down for me in laymens terms.

[DeSwiss]

11. Another wonderful example....

...of the "magic of the marketplace." They can make money in our pockets disappear, and turn up in theirs without leaving the office. Presto Chango! Voila!

- K&R!!!

[killbotfactory]

12. The rich people who run things don't care

They can withstand any catastrophe their greed creates, so why should they?

[cliss]

14. FOOD = the new wealth.

Over the past few months, I've been reading some web sites which cater to Investment professionals, and insiders in the trading industry (stock brokers, commodities brokers, financial people etc.)

This is what their message has been: Forget Real Estate as an investment, watch out for banking stocks. Take your money and move it to: Commodities. Food Commodities. Corn, wheat, grain FUTURES. Put your money there and make a ton of money.

This has been going on for about 6 to 8 months, when the smart money realized the Party was OVER in one area, and it was time to flee for a more profitable one.

[depakid]

15. Yet another "unforeseen" consequence of deregulation

and preferential tax treatment.

[NashVegas]

16. Regulate It: Any Individual Buying In Must Show Proof Of a Distribution Network

ie, no sellee food futures to anyone who cannot show proof they are a decision maker with means of distribution, ie, trucking companies / transportation, supermarkets etc.

The investor class wants to have it both ways: they want interest rates to be on the floor for low-interest loans for themselves (which means pitiful returns for conservative money savers), yet they want to insure high profit *yields* for their own investments. This encourages all manner of sociopathic behavior.