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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Feeding frenzy
  • Date: Sun, 01 Jun 2008 13:47:52 -0600


For some time we've been warning that industral agriculture is headed for
trouble, and we can take steps to protect ourselves locally. Now it's
approaching critical. First excerpts, then whole article from the UK. Eight
more pages at that link.

paul tradingpost@lobo.net
------------------------------------------

... in the more than 3½ decades he has been farming, he has never seen
anything quite like this. The prices of wheat, corn, soybeans and rice more
than doubled in value in the span of several months, sowing equal measures of
confusion and fear in the American heartland.in the more than 3½ decades he
has been farming, he has never seen anything quite like this. The prices of
wheat, corn, soybeans and rice more than doubled in value in the span of
several months, sowing equal measures of confusion and fear in the American
heartland. ... At the same time, the costs of fertilizer, herbicides and fuel
- all crucial to agriculture - have skyrocketed to record heights: Mr.
Giessel's expenses alone jumped half a million dollars in the past year,
twice what they normally are.

One big culprit in the global food crisis has been overlooked: The money.
Pension and index funds used a loophole to plow hundreds of billions of
dollars into commodities markets. .. These funds have plowed tens of billions
of dollars into agricultural commodities as a way to diversify their assets
and improve returns for their investors. .. The amount of fund money invested
in commodity indexes has climbed from just $13-billion (U.S.) in 2003 to a
staggering $260-billion in March, 2008, according to calculations based on
regulatory filings.

Michael Masters, a veteran U.S. hedge fund manager, warned a Senate hearing
this month that this number could easily quadruple to $1-trillion ... "If
immediate action is not taken, food and energy prices will rise higher
still," he told the hearing. "This could have catastrophic economic effects
on millions of already stressed U.S. consumers. It literally could mean
starvation for millions of the world's poor."
-----

Feeding frenzy
May 31, 2008
http://www.theglobeandmail.com/servlet/story/LAC.20080531.RCOVER31/TPStory/TPBusiness/America/

One big culprit in the global food crisis has been overlooked: The money.
Pension and index funds used a loophole to plow hundreds of billions of
dollars into commodities markets

LARNED, KAN. -- Tom Giessel rubs the heel of his palm against his forehead,
exhales a moment, and then begins again, trying to make sense of how the
global food market has suddenly descended into chaos.

He is seated on a couch in his modest white farmhouse, surrounded by acres of
wheat that in a few days will begin to flower, blanketing this central Kansas
town with millions of tiny green beards. Beside him, a sheaf of dried wheat
spills out of a vase, while across the room, a stylized crucifix looms above
the entrance to the kitchen, a solitary stem writhing on the cross.

For three generations, grain has been his family's lifeblood, a source of
sustenance and pride, reward and hardship.

Mr. Giessel, 55, lived through the Russian Wheat Deal in the 1970s, when a
sudden rise in exports to the Soviet Union sparked a boom in prices. He has
endured credit crises, political embargoes, and the vicissitudes of weather
and drought.

Yet in the more than 3½ decades he has been farming, he has never seen
anything quite like this. The prices of wheat, corn, soybeans and rice more
than doubled in value in the span of several months, sowing equal measures of
confusion and fear in the American heartland. Commodities markets, where
these prices take their cue, have become so unpredictable that farmers now
liken them to blackjack tables in Las Vegas.

At the same time, the costs of fertilizer, herbicides and fuel - all crucial
to agriculture - have skyrocketed to record heights: Mr. Giessel's expenses
alone jumped half a million dollars in the past year, twice what they
normally are.

"It used to be that I could figure on things from year to year," shrugs Mr.
Giessel, a stout man with dark eyes, thick forearms and a weathered
countenance. "But now it's like driving down the road with no headlights. You
can look out the window and see the white lines, but you don't know what the
hell you're going to hit. This is the most risk I've been exposed to since I
started farming."

The problems here go well beyond the Kansas border. The record escalation of
food prices has played havoc with every link in the food chain, from grain
merchants to futures markets, from publicly traded food companies to
consumers.

Producers such as Mr. Giessel now find themselves on the front line of a
mushrooming global crisis, one that has sparked violent protests in some of
the world's poorest countries, prompting aid agencies to warn of a pending
humanitarian catastrophe.

In the search for answers, pundits have attempted to pin the blame on the
usual suspects: rising demand from China and India, bad crop conditions and
booming ethanol production.

Yet one major culprit behind these gyrating markets and unprecedented price
spikes has been largely overlooked: the deep-pocketed pension and index funds
upon which most Canadians and Americans depend for their retirements.

These funds have plowed tens of billions of dollars into agricultural
commodities as a way to diversify their assets and improve returns for their
investors.

The amount of fund money invested in commodity indexes has climbed from just
$13-billion (U.S.) in 2003 to a staggering $260-billion in March, 2008,
according to calculations based on regulatory filings.

Michael Masters, a veteran U.S. hedge fund manager, warned a Senate hearing
this month that this number could easily quadruple to $1-trillion, if pension
funds allocate a greater portion of their portfolio to commodities, as some
consultants suggest they are poised to do. Because agricultural markets are
small - relative to stock markets - the amount of cash pouring in gives these
funds substantial clout. Mr. Masters estimated that that these big
institutional investors control enough wheat futures to supply the needs of
American consumers for the next two years, and blamed the "demand shock" from
these recent entrants to the commodities markets as arguably the primary
factor behind the sudden take-off in food prices.

"If immediate action is not taken, food and energy prices will rise higher
still," he told the hearing. "This could have catastrophic economic effects
on millions of already stressed U.S. consumers. It literally could mean
starvation for millions of the world's poor."

Continued on Page 2…
http://www.theglobeandmail.com/servlet/story/LAC.20080531.RCOVER31/TPStory/TPBusiness/America/?pageRequested=2
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