Yes, \’tis Our Debbie, showing once again that she and the World Development Movement have absolutely no fucking clue what they are talking about:
The banks have been here before, but pressure is growing once again as observers become increasingly worried about rising food prices and food shortages.
Barclays was last week\’s punchbag, as protesters from the World Development Movement (WDM) took it to task for being the biggest player in food commodity trading. Deborah Doane, WDM\’s director, attended the Barclays annual meeting to argue that food should not be treated like any other asset class. It\’s essential for survival, she said, so any hint food is effectively being hoarded by investors should be stamped on.
Yes, very good Debs my love.
So, is there any hoarding going on? If there were we would be seeing stocks of foods in granaries, grain silos, warehouses and stores around the world rising, would we not?
Hmm, what was that? Physical stocks are not rising? There is no hoarding going on?
So what in buggery are you bleating about then dear?
And please, don\’t just take my word for it. Here\’s a well known lefty, one who is also rumoured to know something about this economics business. Yes, I give you Paul Krugman:
Many people on the “speculators did it” side like to point to financial data, especially large purchases of futures by various players. But food is a physical commodity, and plays in the financial markets can only move the price to the extent that they affect physical flows and stocks.
(Graph omitted because it is clearly too complex for the likes of you).
OK, how can speculation affect this picture? The answer is, it has to work through accumulation of inventories — physical inventories. If high futures prices induce increased storage, this reduces the quantity available to consumers, and it can raise the price. And you can, in fact, argue that something like this has been happening for cotton and copper, where there are apparently large and growing inventories.
But for food, it’s just not happening: stocks are low and falling.
My experience in these debates is that the response consists of a blizzard of statistics about the size of forward positions, etc.. But remember, every purchase of a futures contract is also a sale — there’s someone on the other side. And neither the purchase nor the sale changes the physical quantity of the commodity available to the market.
So if and when I see signs that speculation is really driving up prices, I’ll say so. But the signature just isn’t there right now.
So Debbie, you\’re wrong. And if you\’d like to get something right about food there\’s the kitchen and it\’s sammich time.