Ironically, global stockpiles of wheat are higher than they have been in years, despite the fact that the price has hit a record of more than £200 per tonne in London, having risen 90pc during last year.
Why not thankfully? Or even \”OMG isn\’t that friggin\’ fabulous\”?
This is straight Adam Smith stuff folks, 235 years old.
We can see that, as a result of various bits of weather around the world, wheat is going to be in shorter supply than we had hoped some months back. If we all kept on consuming wheat as we had expected to some months back there\’s a chance (a risk, a chance, not a certainty) that we\’d run out before the next harvest(s) came in.
And we really would rather not face that medieval problem of the hungry time, when the barns are empty but the crop not yet ripe in the fields.
So, how would we avoid this? Well, the speculators are doing this for us. They can see that wheat is going to be more expensive in the future than it is now. So, they buy and store it. This reduces consumption now (people really do respond to incentives. A higher price for wheat now means less wheat eaten now and more corn, potatoes, polenta instead of pasta, rye, porridge etc) and also suggests to farmers that they want to maximise their production both of the next crop but also of this one. That last achieved at the margin of course: they can\’t go and plant more now but they can add a little more fertiliser, check the weeds a little more, scare off a few more birds etc.
So the speculators, by acting entirely in their own very selfish self interest, desiring only to fill up their wallets with pelf, achieve our goal. They move the future high prices into the present and thus curtail the shortage, lower the chances of a hungry time. The rise in stocks being the proof that this is happening.
Me, I think this is a great system. Just point human greed at the problem and it gets solved.
There are those who disagree, I know, but what\’s their solution? Bureaucrats?