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Agostino: Bullish USDA Report Drives The Market Higher. Did you ever think we would see $7 corn?

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These are very exciting times for grain producers.

Joe

Is anyone selling old crop and what about 2011 and 2012 grain?

If you look at the charts, this does not happen very often.

Question for Mr. Agostino:

 

Do you see outside political influences affecting commodity prices especially in light of all the civil unrest in the Middle East?   There is some (media) chatter that the G20 is tossing around the concept of controlling commodity prices.

 

As commodity prices rise, more people are pushed into poverty and spend a greater portion of their income on food which translates (sic) into smaller purchasing power for other consumer goods which in turn affects the economic recovery plans.

 

"French President Nicolas Sarkozy, who is currently the head of the G20, has argued that commodity speculators should be reined in in order to reduce food price spikes and volatility."

 

What would be the affect if international politic hands steps in and controls agricultural commodity pricing?

http://www.bbc.co.uk/news/business-12499214

Hi Joann,

Looks like the funds jumped out on Tuesday and hammered down the grain markets limit...

Interesting politics and food....do you think they will meddle?

I believe the meddling started when the CBOT merged with the Mercantile Exchange a few years back.

That effectively put all commodities on the same page where derivatives markets are concerned hence causing the food index price to fluctuate wildly.

Further meddling? What would happen if oil is not traded in American dollars anymore? I think that would have a greater impact on the price the Ontario farmer will receive and send a real chill into our economy.
Moe, can you speculate what circumstances (supply/demand adjustments) it would take to drive corn back down to $5/bu?

Yes politics can have a big influence but the CME has tried and warned since 2008 to rein in on crude oil speculators that they would impose strict position limits and since October of 2010 they continue to have hearings but nothing is done.  This would lower liquidity and transparency.  Governments need to stay out of markets.  Third world countries can not afford wheat whether its $3.00 or $9.00/bushel. This has more to do with local government policies and issues that need to be changed. At the end of the day these are all outside market influences that I call noise and they can create more volatility but since June of 2010 corn prices continue to rally in  the face of geo-political risks and headwinds. Lower supply ultimately drives prices higher. Of course higher demand in 2011 is also causing record prices and the only way we can fix this short-term is with a very large crop with big yields in the coming 2-6 months as demand is a lot stronger that many economists will give credit for.  I hope this answers your question. Please visit us at http://risk.management.farms.com

 

 

Moe:  could you please assess the following story?  How much truth is there behind the allegations of Goldman Sachs commodity price setting with their Goldman Sachs Commodity Index (GSCI)?

 

It would appear Goldman Sachs was in a ready position when the Commodities Futures Trading Commission deregulated the futures markets in 1999.  As a result, hedgers, that traditionally were directly involved with agricultural production were outnumbered 4-1 by investment speculators.   Trading of paper wheat outweighed the trading of the real commodity causing wild price fluctuations as a "new category of participants" entered the hedge markets.

 

You state that "Governments need to stay out of markets" yet there are calls to intervene in food trading by investment banks to hedge the price of food for the sake of the countries dealing with starvation. 

 

Should governments regulate who can and cannot trade a basic life necessity?  If so, how would you separate the pricing of grains used for food as opposed to grains used for energy?

http://www.foreignpolicy.com/articles/2011/04/27/how_goldman_sachs_...

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