The official paranoia is probably justified. Considering the misery the greedheads who work at CBOT cause for billions of people in the course of a working day, the idea that some of those immiserated might just want to get even is not exactly a crazy thought. Those who make millions from the grief of others probably DO need protection.
Speculating with Lives
How Global Investors Make Money Out of Hunger
By Horand Knaup, Michaela Schiessl and Anne Seith 09/01/2011
In recent years, the financial markets have discovered the huge opportunities presented by agricultural commodities. The consequences are devastating, as speculators drive up food prices and plunge millions of people into poverty. But investors care little about the effects of their deals in the real world.
The room in which the world's food is distributed looks everything but appetizing. Bits of paper and disposable cups litter the trading floor at the Chicago Board of Trade (CBOT). Sweaty men in bright yellow, blue or red jackets walk around, seemingly oblivious of the debris beneath their feet, waving their hands, shouting and scrapping over futures contracts for soybeans, pork bellies or wheat.
Here, in the trading room of the world's largest commodity futures exchange, decisions are made about the prices of food -- and, by extension, the fates of millions of people. Those decisions affect both hunger on the planet and the wealth of individual investors.
For Alan Knuckman, there is hardly a nicer place than the CBOT trading floor. "This is capitalism in its purest form," the commodities expert raves. "This is where millionaires are made." The 42-year-old's face shines with a boyish glow -- perhaps because he has never stopped playing.
Knuckman arrived here 27 years ago, and quickly advanced from his first job as a runner in the trading room to a trader. He worked for brokerage firms, soon established his own firm and is now an analyst with Agora Financials, a consulting firm specializing in commodities investments. He also writes a newsletter that offers investment tips. "I trade in anything you can get in and out of quickly," he says candidly. "I'm here to make money."
'I Believe in the Market'
How he makes money doesn't make any difference to Knuckman. He draws no distinctions among commodities like petroleum, silver or food products. "I don't believe in politics," he says. "I believe in the market, and the market is always right."
CBOT propaganda from the visitor area (click on picture to enlarge)
How does he feel about exploding food prices? For Knuckman, they are purely a reflection of supply and demand. And speculators? They're good for the market, because they predict developments early on. Is there excessive speculation? "I don't see it."What food speculation means in real life.
It's a surprising comment. Never before has so much cash flowed into financial transactions involving agricultural commodities. In the last quarter of 2010 alone, the amount of money invested in these commodities tripled compared with the previous quarter. There has been a lot of money in the market since the countries of the world tried to overcome the financial crisis with massive economic stimulus programs and bailout packages.
Agricultural commodities attract investors who are no more interested in grain than they were previously in dot-com companies or subprime mortgages. They range from giant pension funds to small private investors searching for new, safer investment options.
Satisfying the Demand
The large index and agriculture funds now being offered by the banks seem to have come along just at the right time to satisfy this demand. All of a sudden, the world's food supplies have become a tradable commodity, as easy to handle as stocks.
The downside is that food prices are rising in parallel to the ravenous demand for agricultural securities. In March, the Food and Agriculture Organization of the United Nations (FAO) reported new record high prices, which even surpassed the prices during the last major food crisis in 2008. According to the FAO's Food Price Index, overall food costs rose by 39 percent within one year. Grain prices went up by 71 percent, as did prices for cooking oil and fat. The index had reached 234 points in July, only four points below its all-time high in February.
"The age of cheap food is over," predicts Knuckman, noting that this can't be such a bad thing for US citizens. "Most Americans eat too much, anyway."
For his fellow Americans, who spend 13 percent of their disposable income on food, the price hike may be an annoyance. But for the world's poor, who are forced to spend 70 percent of their meager budgets on food, it's life-threatening.
Since last June alone, higher food prices have driven another 44 million people below the poverty line, reports the World Bank. These are people who must survive on less than $1.25 (€0.87) a day. More than a billion people are starving worldwide. The current famine in the Horn of Africa is not only the result of drought, civil war and corrupt officials, but is also caused by prohibitively high food prices. more
Fist = Overthrown Governments
Flames = Actual food / inflation riots
Police = Protests / other riots
$ = Price increase announcements / Price Controls / Stock market issues
! = Strike in inflation / food related industries