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while droughts in russia , europe last summer and floods in australia recently have an effect , food is the new gold for speculators who determine the cost of almost everything theese days
Speculators do not ultimate determine the price of commodities. Supply and demand influence the spot price of every market, and unless a futures contract, upon maturity, matches the demand on the spot market, the speculator loses money.
Also, speculators buy low and sell high, or sell high and buy low, which results in price movements being smoothed out, not exacerbated. The blaming of speculators is the oldest scape goat used by politicians, which doesn't stand up to any scrutiny.
If it wasn't for speculators price volatility would be much higher, not lower.
Here is an article by economist Robert Murphy; it is quite technical but worth the read:
http://www.instituteforenergyresearch.org/2008/06/23/speculators-not-to-blame-for-high-oil-prices/
Strikes me that most value is added to agri products at processing stage. I have invested in companies that do this. They have performed well in the current crisis, and include a dividend.
the retailers get the biggest slice of the pie with the primary producer getting the short straw
Fair point.Retailers are good stocks to hold. But stocks in large retailers in recent yrs has risen considerably. Better value now in my view in the processing end.
That is a valid assumption, but just as valid is the assumption that rather than a decrease in demand, there was an increase in supply through a central bank selling or a mining company increasing hedging positions. Either and many more assumptions could be true, which means it is never as black and white as you state.surely one of the reasons gold has been dropping like a stone this past month is due to speculators dumping gold and returning to equities , speculators get bored with a particular assett and move on to another one
Population growth is one aspect, but I believe that the biggest driving force will be increased wealth in China and India. The first thing people spend more on when they become wealthier is better dietsHeard a guy on Pat Kenny today talking about food prices. Didn't catch his name, but he said that food consumption would increase by 60 % over the next ? few yrs. Presumably this has a lot to do with population growth and growing industrialisation in China and the like.
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