FacebookTwitterGoogle+RedditEmail

Food Should Not be a Poker Chip

by SARAH ANDERSON

This Thanksgiving, most farmers around my hometown in central Minnesota are celebrating a good harvest. Rain for once fell at the right time in the right amounts, and prices for many crops grown in Litchfield are high.

After yo-yoing up and down for the past several years, corn prices are particularly high. In mid-October, the national average was $4.78 per bushel, up $1.17 from the year before. Corn-Belt families still have to cover the costs of expensive fertilizer and other inputs, but many will be able to enjoy a more bountiful holiday this year.

In the long term, however, such drastic price swings are as bad for farmers as they are for consumers. How do you plan for the future? If farmers make plans now to plant more corn next year, the price bubble may pop before they can sell their crops.

One reason agricultural commodity prices have been so volatile is the rampant gambling in the futures markets

One reason agricultural commodity prices have been so volatile is the rampant gambling in the futures markets. These markets were originally created to help ensure more stable prices for the actual producers of corn, wheat, milk, and other commodities, as well as food manufacturers, like flour mills and cereal makers.

A farmer-owned grain elevator, for example, can use a futures contract like insurance to fix a price for a future sale. This allows them to plan ahead without having to worry about wild price swings.

Today, however, the commodities markets are dominated by speculators who have never gotten their hands dirty in a corn field, or come anywhere near a food processing plant. They’re simply big-time gamblers, hoping to profit from changes in futures prices.

It’s now widely recognized that excessive speculation played a significant role in the 2008 food crisis, when soaring prices pushed 130 million people into hunger in the world’s poorest countries. Here in the United States, consumers also faced the sharpest increases in grocery prices since 1980. These problems were exacerbated by the dismantling, over the past couple of decades, of programs designed to protect farmers and consumers, such as food reserves, price supports, and import controls.

The financial reform bill that became U.S. law in July made some progress in cracking down on speculation. It limits how much a trader can hold in a certain commodity and increases market transparency.

However, the new law doesn’t address problems with commodity index funds and exchange-traded funds. Institutional investors like pension funds and university endowments have been plowing money into such funds, driving prices artificially high. Then, as we saw with the 2008 crash, speculators can exit in a stampede, causing prices to plummet.

A coalition of family farm, faith-based and anti-hunger groups, along with business associations have initiated a campaign to persuade investors to pull out of commodity index funds. Their first target: CALSTRS, the California teachers’ retirement system, which had been considering shifting $2.5 billion of their portfolio into commodities.

In response to the divestment campaign, the CALSTRS board decided on November 4 to adopt a different strategy. Instead of $2.5 billion, they will invest no more than $150 million in commodities for 18 months, while further studying the potential problems.

This is an important step towards shutting down the global financial casino where food is traded like a poker chip. The big-time gamblers should stick to the Las Vegas casinos. Let’s keep food where it should be–on our tables.

SARAH ANDERSON is a Fellow of the TNI’s sister Institute for Policy Studies in Washington D.C and head of the Global Economy Programme.

 

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
December 09, 2016
Friday - Sunday
Jeffrey St. Clair
Roaming Charges: Nasty As They Wanna Be
Henry Giroux
Trump’s Second Gilded Age: Overcoming the Rule of Billionaires and Militarists
Andrew Levine
Trump’s Chumps: Victims of the Old Bait and Switch
Chris Welzenbach
The Forgotten Sneak Attack
Lewis Lapham
Hostile Takeover
Joshua Frank
This Week at CounterPunch: More Hollow Smears and Baseless Accusations
Paul Street
The Democrats Do Their Job, Again
Vijay Prashad
The Cuban Revolution: Defying Imperialism From Its Backyard
Michael Hudson - Sharmini Peries
Orwellian Economics
Mark Ames
The Anonymous Blacklist Promoted by the Washington Post Has Apparent Ties to Ukrainian Fascism and CIA Spying
Erin McCarley
American Nazis and the Fight for US History
Yoav Litvin
Resist or Conform: Lessons in Fortitude and Weakness From the Israeli Left
Conn Hallinan
India & Pakistan: the Unthinkable
Andrew Smolski
Third Coast Pillory: Nativism on the Left – A Realer Smith
Joshua Sperber
Trump in the Age of Identity Politics
Brandy Baker
Jill Stein Sees Russia From Her House
Katheryne Schulz
Report from Santiago de Cuba: Celebrating Fidel’s Rebellious Life
Nelson Valdes
Fidel and the Good People
Norman Solomon
McCarthy’s Smiling Ghost: Democrats Point the Finger at Russia
Renee Parsons
The Snowflake Nation and Trump on Immigration
Margaret Kimberley
Black Fear of Trump
Michael J. Sainato
A Pruitt Running Through It: Trump Kills Nearly Useless EPA With Nomination of Oil Industry Hack
Ron Jacobs
Surviving Hate and Death—The AIDS Crisis in 1980s USA
David Swanson
Virginia’s Constitution Needs Improving
Louis Proyect
Narcos and the Story of Colombia’s Unhappiness
Paul Atwood
War Has Been, is, and Will be the American Way of Life…Unless?
John Wight
Syria and the Bodyguard of Lies
Richard Hardigan
Anti-Semitism Awareness Act: Senate Bill Criminalizes Criticism of Israel
Kathy Kelly
See How We Live
David Macaray
Trump Picks his Secretary of Labor. Ho-Hum.
Howard Lisnoff
Interview with a Political Organizer
Yves Engler
BDS and Anti-Semitism
Adam Parsons
Home Truths About the Climate Emergency
Brian Cloughley
The Decline and Fall of Britain
Eamonn Fingleton
U.S. China Policy: Is Obama Schizoid?
Graham Peebles
Worldwide Air Pollution is Making us Ill
Joseph Natoli
Fake News is Subjective?
Andre Vltchek
Tough-Talking Philippine President Duterte
Binoy Kampmark
Total Surveillance: Snooping in the United Kingdom
Guillermo R. Gil
Vivirse la película: Willful Opposition to the Fiscal Control Board in Puerto Rico
Patrick Bond
South Africa’s Junk Credit Rating was Avoided, But at the Cost of Junk Analysis
Clancy Sigal
Investigate the Protesters! A Trial Balloon Filled With Poison Gas
Pierre Labossiere – Margaret Prescod
Human Rights and Alternative Media Delegation Report on Haiti’s Elections
Charles R. Larson
Review:  Helon Habila’s The Chibok Girls: the Boko Haram Kidnappings and Islamist Militancy in Nigeria
David Yearsley
Brahms and the Tears of Britain’s Oppressed
FacebookTwitterGoogle+RedditEmail