Food Crisis Benefits Goldman

Food commodities should never have been deregulated allowing for derivative investments based on food commodities. It is extremely dangerous and harmful having food commodities controlled by large, powerful institutional investors such as hedge funds, pension funds and investment banks, all of which are unconcerned with agricultural market fundamentals.

Some $9+ trillion in trades take place in commodity derivatives, with 80-90% in over the counter (OTC) trading, outside public scrutiny. Five banks control 96% of derivatives activity, giving a few players decisive market power. The ratio of non-commercial speculators to commercial hedgers (those with a commercial interest in the traded commodity) is by some estimates 4:1, roughly a reverse of the shares ten years ago when speculators accounted for 20% of the activity. Then, such speculators indeed provided liquidity to the markets without overwhelming them. That is no longer the case... the food markets are now being excessively influenced by speculative interests... this should not be allowed to happen... food should never be a speculative investment.

 2.16.11  ... a follow up...

Speculation And The Frenzy In Food Markets

Food Crisis Benefits Goldman Sachs | Common Dreams