

Biodiesel producers rejoice at new mandate for 2013



Source: Desmoines Register

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RE: burn food just brilliant
By Paj on 9/19/2012 11:31:21 AM , Rating: 2
Trade protection has caused millions in the past 5-6 years to go hungrier then need be

So you're happy to eliminate farm subsidies then? Good luck convincing the farming lobby.

Food prices have risen dramatically because regulations on trading food derivatives were lifted.

Billy Bob can speak to his bank and agree to sell his crop at a certain amount come harvest time - this could protect him against risk if the harvest is poor. But then that agreement can then be traded with another bank for more than the price agreed with Billy Bob - it becomes a security, a tradable asset. Do this several times and the price becomes astronomically higher than the original amount as each middleman adds a commission on to it.

What this does is completely distort the role that supply and demand plays in determining the price of food.

RE: burn food just brilliant
By JediJeb on 9/19/2012 6:57:46 PM , Rating: 2
The middle man trading is the biggest problem with food prices. My family has been in farming for decades and it is sad to say but even now you can sell a bushel of corn for nearly the same price you sold it for in 1970. Depending on the market timing, especially around harvest time watch the prices drop. The only farmer who can make higher prices on their crops are the ones who can contract at the exact right time or who have storage space to hold it until the prices increase. The problem with the contracts is if you contract to deliver at say $3/bushel and 1000 bushels and the price goes up you still have to sell at $3, if the price goes down you win. On the other hand if you have a bad crop year(like the drought this year) and you only grow 800 bushels, you have to cover the missing 200 bushels somehow(penalty to price or you must buy at a higher price and sell at lower price to cover your shortage).

They call them Farm Subsidies, but most of it goes to the middlemen not the farmers. Even if you look at the price of corn in 1970's when it was only $2/bushel and now at maybe $4-$5/bushel that is a 2-2.5x increase, yet diesel fuel for your equipment was maybe $0.30/gallon in 1970, is it only $0.60-$0.75/gallon now? Even with corn at $8/bushel as it was a few years ago during the price spike equivalent diesel prices should be at $1.20/gallon now. What farmers make versus what their expenses are has dropped quite a bit in the last 40 years or so. A tractor that cost $5000 in 1970 now costs about $60,000, same with vehicles, equipment and almost every other item a farmer buys yet for a cattle farmer a steer sold for about $1.00/ pound in 1970 and maybe $2.00/pound now. I bet the price in the store or restaurant has more than doubled in that time frame.


Greed within the system has cause the prices to go up, not down at the farm level. Also the reason most in foreign countries are going hungry is because of their government, not a world wide lack of food. We grow enough food to feed everyone comfortably, yet two bit dictators are spending their countries money on weapons and bobbles for their mistresses instead of the food their people need. There are countries in most of the third world that are full of resources like diamonds, gold, oil, coal, and more where there people go hungry because of abuse of their governments.

RE: burn food just brilliant
By Ringold on 9/19/2012 10:26:34 PM , Rating: 2

This has been put out in the public realm by fear-mongers and refuses to die. Liberal economists, from Nobel laureate Paul Krugman, conservative economists, both agree on one thing: Derivative contracts can have little to no impact on commodity prices. They by their very nature cancel themselves out. Several studies, including by industries, government agencies (such as CFTC), NBER and academic economists in published papers (MIT) all find little to no evidence of volatility not consistent with known information, and point out that various commodities that do not have futures contracts or any derivatives at all, such as onions, show the same patterns of volatility AND the same increase in price. First link I found from it was from left-leaning CNN, even those idiots got it right.

Also, as someone that's traded commodities on occasion, commissions are cheap. This isn't 1970.

But again, as much as I think Paul Krugman is a left-wing loon, google for his blog post "it takes two to contango" from a couple years ago. He explains how its nigh-impossible to impact real prices via derivatives markets.

Fact is, billions of people are working their way up the income ladder in post-Deng Xioping China and semi-reformed India, Brazil and elsewhere. And what do they want with that extra income? A lot of things, but chief among them, something other than pig fat and rice to eat. FFS, do you blame them? It's all econ 101.


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