How commodity index funds are changeing the futures market and driving up grain prices for consumers

[JohnWxy]

You won't hear this on your simulated network news programs (NBC, ABC, CBS) they do no thinking or even a little bit of investigating. THey prefer to join in with the chorus chanting that food price rises are entirely the fault of biofuels. Well, the demand for biofuels is trivial compared to the demand from hedge fund managers and index funds. When the stock market outlook begins to look bad the managers get out of stocks and get into commodities - energy, materials and grains. But looking into that would be to much for our boys and girls of info-tainment world.


But here is a report from the NIghtly Business Report:

http://www.pbs.org/nbr/site/onair/transcripts/080408c/

How Commodity Index Funds Are Changing The Futures Markets

SUSIE GHARIB: There's been a sea change in the commodities trading market. For more than a century, farmers, grain elevators and manufacturers used the futures markets to hedge risk. Now, a new player has jumped into that market: commodity index funds. Similar to mutual funds, they buy commodities rather than stocks. As Diane Eastabrook reports, critics say these funds are inflating prices and changing the way futures markets are supposed to work.

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EASTABROOK: Analysts say hot demand is driving up grain prices, but so too is a flood of investment money from commodity index funds. Some experts estimate the funds have been pouring up to a billion dollars a week into grain futures since the beginning of the year. Economist Dan Basse, president of Ag Resource Company, has been closely monitoring the funds' involvement in the futures markets. He thinks the funds could be having too much of an influence, because they are buying millions of bushels of grain.

DAN BASSE, PRESIDENT, AG RESOURCE COMPANY: I am concerned with that kind of ownership and what that has in terms of raising prices for consumers and for traders and for everybody else.

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EASTABROOK: Still, the Commodity Futures Trading Commission will in a couple of weeks, hold a hearing on changes in the agriculture markets. And CME Group, owner of the Chicago Board of Trade, is also watching the grain markets. Director David Lehman says the exchange is talking to customers and weighing various options.

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another article:

Banker, grain dealers blame hedge funds for risking wheat industry

and from Bloomberg:

Speculators are boosting grain and energy prices - Bloomberg