
The scoop on rising food costs  - pitdesi
http://articles.boston.com/2011-06-19/business/29677639_1_ice-cream-scoop-gasoline-prices
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thaumaturgy
I keep hearing the phrase "worldwide food costs are at an all-time high" on
NPR and in other news outlets; although I would expect natural disasters and
political conflict and other changes in supply and demand to affect specific
regional markets, I find it difficult to ascribe a worldwide across-the-board
rise in commodities to just those explanations.

(I would expect a higher demand in China for American milk to actually
decrease domestic milk prices, for example, assuming that production could be
scaled upward to meet demand; given what I've seen of the dismal conditions of
several dairy farms in California, healthy pastureland doesn't seem to be a
requirement for operating a dairy.)

There's a solid alternative theory -- as yet unproven, though -- that makes a
lot more sense to me. Relatively recent changes in the handling of speculation
in commodities is causing across-the-board price increases where prices should
be decreasing instead. For more info:
[http://english.aljazeera.net/indepth/opinion/2011/04/2011415...](http://english.aljazeera.net/indepth/opinion/2011/04/2011415143212280315.html)

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serichsen
I was immediately reminded of the same story. As far as I remember,
speculators (who are important for a market, but should not dominate it) have
been relatively recently allowed to dominate the market they speculate in.
This led to them simply buying and buying, speculating on the rising prices
the buying itself causes.

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thaumaturgy
Yes. IIRC, the critical change was that a major investment firm successfully
lobbied regulators to allow them to give investors the option of indefinitely
rolling over their commodities investments for a small fee. Investment firms
are making a ton of money on the rollovers, and investors are simply
purchasing commodities orders at whatever price they're available for and
sitting on them until the market prices raise enough for them to feel like
selling the orders.

So, I could buy a pile of grain or a truckload of oil or what-have-you, not on
the expectation that I'll be able to sell it for more money 6 months from now,
but on the expectation that I can sit on it until I _can_ sell it for more
money. Basically, it gives me a place to stash money, that's guaranteed to pay
me back at whatever rate I feel like demanding.

The downside for everyone else is that this is creating artificial scarcities
in markets across the board. There's a glut of oil in storage right now that
isn't being refined into gasoline or other products just because investors
somewhere are waiting for the price to go up before they let go of it.

When you look at the peculiar way that so many commodities prices have risen
so quickly in recent years, and at the way that other more traditional markets
have been recovering more sluggishly than people are expecting, and at the way
that the real estate market has been staying in gutter, this theory starts to
make a lot of sense. There seems to be a lot of investment capital missing
somewhere, and commodities seems to be inflated.

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HaloZero
Why hasn't it happened such that somebody just goes to a nation like India and
brings modern farming technologies that yield such high growth products here?

This allows people to grow products a fraction of the price but at a similar
market value. Thus eliminating that 5x increase in the cost of feed for the
milker, allowing him to expand his supply to meet the new demand for milk.

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william42
Isn't that what the Green Revolution was?

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HaloZero
See above about the cows in India vs United States.

There have also been significant advancements in farming since the 1970s when
the Green Revolution happened I would think.

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mathgladiator
This on the flip side is creating an opportunity to optimize (if you have the
land) to iterate in farming.

~~~
thaumaturgy
Hahaha. Modern farming methods are advanced. If you think a background in
programming would be enough to contribute a significant advance to the science
of farming, then you've fallen into the common programmer's trap of actually
believing that understanding one kind of system means you can more easily
understand unrelated systems.

You would likely have to spend years in study and practice before you could
expect to contribute to agricultural science.

