Speculators Rediscover Agricultural Commodities

The strategy is as ancient as trade: A speculator corners the market of a choice product, reduces supply and then profits on climbing prices. The best source for profits is indispensable products – like energy, housing or food. A London hedge fund now controls about 7 percent of the world’s cocoa production, bringing cocoa prices to 33-year high, reports Spiegel Online. “The turbulence in the cocoa market is the most recent sign that speculation is back, and that the international financial markets have rediscovered agricultural commodities,” report Susanne Amann and Alexander Jung. Banks and hedge funds invest in food basics like wheat, coffee, rice, sugar, corn and soybeans. Cornering markets has its risks, though, as consumers immediately react to high prices by seeking substitutes. Preparing to assist a billion starving people, global aid organizations demand greater government regulation of investors who manipulate food prices. – YaleGlobal