I'd get long soft commodities here. And on the way up for some time.
Monday, April 14, 2008
World Unrest Over Food Prices
When I read this article posted on CNN.com, all I can think about is not an end to rising food prices, but more problems ahead. When governments step in and try to institute price controls, this will only drastically limit supply, so the only other option is for governments to pay the open market price and subsidize the remainder of the price to its citizens. Bear in mind, if you are feeling emotional or feel there may be moral implications to making money off of this, then be comforted by the fact that most nations produce enough rice for their populations, it is the remainder that needs to be filled or the amount that gets fed to animals to create more food that is bid up in open markets globally. This is increasing the price of subsistence for many people struggling to make it into the middle class and eat more than just a bowl of rice. However it is also not just the open markets setting these prices, so again, take heart. If there was truly enough supply then this would not be much of an issue. The major culprits here are not free markets and profiteers, they are global growth in the face of global shortages in food supply. Simply put, profits are made in inefficient markets, not ones with well defined supply and demand. Currently we have a dearth of supply and enough demand to incite riots.
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