World Events
Topic: US / world Food Shortage

#	Author	Message
21	EighthDwarf Sat 4/26/2008 7:22a	Economic theory says that when the price of a good goes up supply will increase. So if the equilibrium price has changed due to a permanent demand increase in demand, a permanent decrease in supply, etc. then the prices will stay high. Prices started going up and then speculators stepped in to take advantage of the bull market. Once supplies increase to meet the increased demand the bubble will burst. Panic feeds the bulls folks. Stay calm.
22	Mrs ElderP Sat 4/26/2008 7:31a	^^ What he said. The crazy thing is that this has applied to gas before. At the height of the oil crisis in the early 80s oil got to nearly (an inflation adjusted) $100 a barrel. And, as we all know it did eventually go back down. I clearly remember when I was a little girl and the two litle stations in our little town had a gas war and gas dipped temporarily below a $1 a gallon. I remember it because I remember my mom saying she thought she'd never see gas below a $1 again. We're "only" 5 years into the current price escalation. As I understand it, it takes only 3 years to get a new oil field online. When is the market going to bring down the price of oil? I bet that would help bring down the price of food. (I understand that the price of oil is partly due to speculation, but it's also due to increase in demand worldwide. The market should, however, correct to adjust for the increase in demand. Any time now, that would be fine with me!)
23	Mr X Sat 4/26/2008 7:40a	I would say that panic feeds the bears, Eighth. Mania feeds the bulls. That and greed. (unless you mean panic in the sense of "I'm in a panic cause I'm not onboard", or something?)
24	mrkthompsn Sat 4/26/2008 11:21a	Just put sugar back into Coke and Pepsi, and the corn supply will increase again.
25	EighthDwarf Sat 4/26/2008 8:59p	<<I would say that panic feeds the bears, Eighth.>> That's true in the stock market but not so much in the commodity market. For example, you are suddennly afraid the price of corn is going up so you buy a contract now to purchase x number of bushels a year from now at a certain price. You do this because you are afraid the price is going to continue to soar but your actions ensure the price will continue to soar. And the futures day-traders (aka speculators) are there to sell you the contract, though they have no intention of fulfilling it. When they get caught with their pants down, watch for prices to come back down.
26	Mr X Sat 4/26/2008 9:07p	That would be the commodities futures markets right? Don't they also have regular commodities markets? What if you are buying today, rather than locking in a contract for some future transaction? The stock market also has a futures trade, of course, and yes I can understand your point on that one (that panic causes the bulls to react). p.s. Funny story about a commodities speculator I read online. He accidentally forgot to unload one of his contracts, so he ended up stuck with pretty much a truckload of wheat. :p
27	EighthDwarf Sun 4/27/2008 8:51a	Yeah, you have to be careful with commodities. And the commodities market is a forwards/futures market. When you see prices on a daily basis, those are SPOT prices - averages of the forward/futures contracts that are active. If you are buying today, you are generally not buying on an exchange. Production and delivery are based on the what is arranged beforehand via the forward/futures contracts. The contracts switch hands on an intra-day basis, but the commodities themselves do not. So, like in the stock market, you get trading momentum based on emotion. But the underlying fundamentals are sometimes put aside. Think about it. We are heading into a global slowdown meaning there will be less global consumption. And yet the commodities markets are betting on increased consumption. Food is more expensive right now because the futures trades are making it so - but there is no food shortage yet. It's all demand-driven, not supply-driven. And I am betting the demand will tail-off.
28	DAR Mon 4/28/2008 8:12a	But it's driving the price of food up that's not a good thing.
29	EighthDwarf Mon 4/28/2008 8:17a	Ethanol production is an abomination. It is hurting the environment much much more than it is helping it. The only people it is helping are the farmers growing it and the politicians that are promoting it. There are many other better ways to produce energy. However, like oil, ethanol production is governed by special interests - it'll be hard to get untangled from its web.
30	RoadTrip Mon 4/28/2008 8:28a	<< But it's driving the price of food up that's not a good thing.>> So? The percentage of income that the average American spends on food is still considerably lower than it was in 1960. High gas prices take a far bigger bite out of a person's budget than increasing food costs does. <<Ethanol production is an abomination. It is hurting the environment much much more than it is helping it. The only people it is helping are the farmers growing it and the politicians that are promoting it.>> No it is not (show me ANYTHING that says it is). I will agree that it is pretty much a wash... that it doesn't help the environment but doesn't harm it any more than oil production does. But being green really has nothing to do with ethanol production. It has to do with freeing ourselves from dependence on foreign oil.

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