[GJM] Fw: [globalnetnews-summary] Wall Street Grain Hoarding Brings Farmers, Consumers Near Ruin

[mary rose]

To commodify food in this manner is both immoral and unethical
behavior.  It is also a despicable and "death-defining" practice
that is so deparaved as to be unspeakable.  This kind of behavior
must be condemned and laws must be instituted to prohibit the
continuation of this type of  market "gambling" which affects billions
of lives internationally, placing life or death on the toss of a coin so
to speak. . .

The real sickness of this is that, as a collective consciousness,
 we consider it "normal" behavior to jeopardize billions
of lives in order that a a few may make money from hoarding
food for profit.  This needs to change. . .

This cannot be condoned and we need to speak out against
such practices and demand that it be stopped immediately.

It is a violation of human rights.

mary rose

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Subject: [globalnetnews-summary] Wall Street Grain Hoarding Brings Farmers, 
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Wall Street Grain Hoarding Brings Farmers, Consumers Near Ruin
http://www.bloomberg.com/apps/news?pid=20601109&sid=aDZej7GJjpjM&refer=home
By Jeff Wilson

April 28 (Bloomberg) -- As farmers confront mounting costs and riots erupt 
from Haiti to Egypt over food, Garry Niemeyer is paying the price for Wall 
Street's speculation in grain markets.

Commodity-index funds control a record 4.51 billion bushels of corn, wheat 
and soybeans through Chicago Board of Trade futures, equal to half the 
amount held in U.S. silos on March 1. The holdings jumped 29 percent in the 
past year as investors bought grain contracts seeking better returns than 
stocks or bonds. The buying sent crop prices and volatility to records and 
boosted the cost for growers and processors to manage risk.

Niemeyer, who farms 2,200 acres in Auburn, Illinois, won't use futures to 
protect the value of the crop he will harvest in October. With corn at 
$5.9075 a bushel, up from $3.88 last year, he says the contracts are too 
costly and risky. Investors want corn so much that last month they paid 55 
cents a bushel more than grain handlers, the biggest premium since 1999.

``It's the best of times for somebody speculating on grain prices, but it's 
not the best of times for farmers,'' said Niemeyer, 59. ``The demand for 
futures exceeds the demand for cash grains.''

Commodity investors control more U.S. crops than ever before, competing with 
governments and consumers for dwindling food supplies. Demand is rising with 
population and income gains in Asia, while record energy costs boost 
biofuels consumption, sending grain inventories to the lowest levels in two 
decades.

Fund-Buying Gains

Index-fund investment in CBOT corn, soybeans and wheat has increased 66 
percent to the equivalent of 902,105 futures contracts, a record, since 
January 2006, when the government began collecting the data. Each contract 
represents 5,000 bushels, about what Niemeyer reaps from every 22 acres of 
corn planted.

Investments in grain and livestock futures have more than doubled to about 
$65 billion from $25 billion in November, according to consultant AgResource 
Co. in Chicago. The buying of crop futures alone is about half the combined 
value of the corn, soybeans and wheat grown in the U.S., the world's largest 
exporter of all three commodities. The U.S. Department of Agriculture valued 
the 2007 harvest at a record $92.5 billion.

Commodities are in their seventh year of gains, with oil rising to a record 
$119.90 a barrel on April 22. Copper and gold reached their highest prices 
ever this year, and rice has more than doubled in the past year to $24.18 
per 100 pounds.

Crops and raw materials have ``become an asset class that institutions use 
to an increasing extent,'' billionaire George Soros said April 17. ``On top 
of that, you have specific factors that create the relative shortage of oil 
and, now, also food.''

Food Riots

Surging food costs have sparked protests and riots in countries including 
Haiti, Indonesia, Mexico and Egypt. Rice, corn, soybean and wheat prices 
have climbed to records this year, partly because of droughts in Australia, 
a freeze in Kansas and increased demand for livestock feed.

The divergence between CBOT futures and the underlying commodity is so great 
that some grain merchants have stopped bidding for new crops, said Niemeyer, 
a member of the National Corn Growers Association board. Others won't 
guarantee a price for more than 60 days.

``We have a fundamental problem with the markets,'' said Kevin McNew, 
president of researcher Cash Grain Bids Inc. in Bozeman, Montana, and a 
former Montana State University economist. ``It is very difficult to operate 
a grain business when the cash prices are below the futures'' by such a wide 
margin, he said.

The price gap should converge when futures contracts expire and deliveries 
are settled. Instead, the average premium for CBOT wheat has quadrupled in 
two years to 40 cents a bushel, compared with 10 cents the prior five years, 
McNew said.

Demands on Capital

The grain rally also is boosting costs for grain processors including Archer 
Daniels Midland Co. and Bunge Ltd.

``A volatile, high price environment presents some challenges,'' Alberto 
Weisser, chief executive officer of White Plains, New York-based Bunge, said 
during an April 24 conference call. ``It creates demands on working capital 
and leads to inflationary pressures that can influence national policy 
decisions.''

In its April 24 earnings report, Bunge's margin deposits, mostly used to 
hedge grain on the CBOT, rose fivefold to $188 million in the first quarter.

Companies have increased debt to finance more expensive inventories, said 
Judi Rossetti, director of corporate finance for Fitch Ratings in Chicago. 
Without a reduction in debt, grain processors may need to sell shares to 
raise cash, or corporate debt ratings may be reviewed, Rossetti said.

Not Worth Risk

For James McReynolds, who farms 2,000 acres of wheat outside Woodston, 
Kansas, futures aren't worth the risk.

``The differential of what the market should be and what you can actually 
sell is so far out of line that you aren't willing to do it,'' McReynolds 
said. ``This is a tough situation. Agriculture is not as healthy as we'd 
like to think it is.''

Wheat jumped to a record $13.495 a bushel in February, twice the level of a 
year earlier, only to fall 15 percent in March, the biggest monthly decline 
since 1997. Volatility in corn futures jumped to almost 41 percent in March, 
up from 23 percent a year earlier, data from the exchange show.

The increased risk boosts the cost of buying grain.

Michlig AgriCenter Inc. in Manlius, Illinois, a grain handler with 6.5 
million bushels of storage capacity, often buys crops before they are 
produced and uses the CBOT to manage its price risk. The cost to set hedge 
positions for corn delivered in December, after the harvest, is three times 
higher than a year ago, said Scott Stoller, a Michlig grain merchandiser.

Dell Princ, 51, general manager at silo owner Midway Cooperative in Osborne, 
Kansas, said the monthly interest to finance his hedges tripled to $150,000 
in the past year as the exchanges in Chicago and Kansas City demanded more 
money to cover any potential losses on his positions.

The additional expense can add 15 cents to 40 cents a bushel to the cost of 
handling wheat, compared with 5 cents to 10 cents on sales in years past, he 
said.

``The interest costs eat profits,'' Princ said.