Investment bankers blamed for driving up the price of turkeys

First they swallowed tasty bonuses - now speculation in wheat by City traders has swollen the cost of Christmas dinner

* Terry Macalister
* guardian.co.uk, Thursday 16 December 2010 17.41 GMT

Organic turkeys Turkeys bred for the Christmas market, like these freerange Norfolk Black birds, are likely to cost more this year because of speculation in the wheat market. Photograph: Matt Cardy/Getty Images

Investment bankers have come in for more abuse – not over their bonuses this time but for allegedly driving up the price of Christmas turkeys.

Paul Kelly, the poultry industry's "turkey man of the year", blames them for driving up the cost of wheat-based animal feed from £95 per tonne to £177.

"My contacts in the City tell me the price of wheat is soaring because of financial speculation," he said. "It's not good for farmers or consumers. What is happening is fundamentally wrong and obscene."

The boss of Kelly Turkey Farms in Essex warns that consumers can expect to pay up to £3 extra for their birds while Waitrose confirmed that its turkeys will cost 5% or 6% more than last year.

The increase in feed prices comes despite strong commodity supplies. Wildfires destroyed some Russian wheat during the summer, but the US and other grain producing regions have had good harvests.

Since the financial crisis began, market analysts have watched speculative money pouring into commodity derivative markets, including food. Many experts link this activity by banks and hedge funds to recent volatility and sudden inflation in the retail costs of food and energy.

The World Development Movement, a UK-based anti-poverty group, said the government needed to support measures being discussed inside the EU to regulate markets better and curb the behaviour of investment bankers and hedge funds.

"As City traders enjoy their Christmas bonuses, their speculative activities are fuelling food price inflation," said Deborah Doane of the WDM.

"This is bad news for the millions who live on the breadline in developing countries, as well as for hard-working families struggling to get by here in the UK.

"Even on Christmas Day, the British public is facing higher food bills at a time they can least afford it, as again we bear the brunt of bankers' greed."

Investment bankers blamed for driving up the price of turkeys | Business | The Guardian

Quote:

"As City traders enjoy their Christmas bonuses, their speculative activities are fuelling food price inflation," said Deborah Doane of the WDM. "This is bad news for the millions who live on the breadline in developing countries, as well as for hard-working families struggling to get by here in the UK. "Even on Christmas Day, the British public is facing higher food bills at a time they can least afford it, as again we bear the brunt of bankers' greed."

We ain't seen nutthin' yet.

First comes instability caused by "speculation" riding on the back of price variability with demand, that was what was happening in 2008, then comes instability due to resource availability changes being added to the effect of speculation. The former is essentially self limiting the latter however may not be.

F

__________________
"Patriotism means being loyal to your country all the time and to its government when it deserves it."-- Mark Twain

"Inter arma silent Musae"--when the weapons speak, the muses fall silent.

An't nanum hearm deth, doth hwaet ye willath.

It is forbidden to kill; therefore all murderers are punished
unless they kill in large numbers and to the sound of trumpets. -Voltaire

Economic Left/Right: -3.88
Authoritarian/Libertarian: -4.36

Originally Posted by FredFredson

First comes instability caused by "speculation" riding on the back of price variability with demand, that was what was happening in 2008... The former is essentially self limiting...

Worst than that. It may not be occuring at all. They said the same thing about oil. Blame the speculators. Right.

But, in a world with a fixed/steep supply (for whatever reason), what is the consequence of even small variation of demand? Yep, eco 101 - Big price fluctuations.

So, if the OP wants to make his case, he is going to have to really work on proving that bit: "The increase in feed prices comes despite strong commodity supplies". I cannot say that I know much about the wheat market per se and the USDA report I just googled is a bit all over the place...

Still, I note "World wheat trade for 2010/11 is projected lower this month as tighter supplies of high quality wheat raise world prices and slow demand in several smaller markets. Global 2010/11 wheat consumption is raised with higher expected wheat feeding in China and higher expected feed and residual disappearance in Australia and Canada".

Also: http://www.igc.int/downloads/gmrsummary/gmrsumme.pdf

"Having already climbed by over 50% since July, world grain prices moved yet higher in the first part of November, before retreating in the face of heavy selling at the major exchanges. The market’s reversal was mostly ascribed to external factors, including recent changes in China’s economic policies as well as increased global financial uncertainties, with the US dollar registering sizeable gains. These overwhelmed grain market fundamentals, which generally remained potentially bullish. For wheat, concerns about the next US winter wheat crop, tightening EU export supplies and mixed harvest results in Australia failed to halt the slide in prices, although US export quotations did again harden towards the end of the month".

Furthermore, in a world where there is widespread fears about the potential inflation risks in the near future, hard assets are naturally going to have a tendancy to be rising in price. Whether wheat or gold.

__________________
Unless otherwise specified, I am posting as a regular poster. When I will act as a mod, I'll make sure you're in no doubt.