Commodity pricing for dummies

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

Start talking about “commodities” to most people at a gathering and you’ll draw some blank stares. Mention “commodity crops,” and unless they’re directly involved in agriculture, or you happen to be partying with one of the five commissioners of the U.S. Commodity Futures Trading Commission, your conversational companions will be excusing themselves before you finish your sentence.

But in truth, commodities, which the dictionary defines as “any article of trade that can be turned to commercial advantage,” are the basis of the entire global system of agricultural production, food processing and further processing of essential fiber and biofuel products.

Which is why it’s a shame most people don’t know—or don’t want to know—about the cause-and-effect relationship between the supply of and the demand for commodities in the global marketplace. If they did, they might not be so quick to blame American farmers when grocery prices seem to keep going up, and they might not be so willing to pile on “Big Agriculture” when the political fireworks over farm bill funding begin again.

In 2008, most Americans got a glimpse of the impact of supply and demand when food prices here temporarily spiked and when other areas of the world suffered disastrous shortages. The reason was a combination of factors, including weather conditions, harvest disruptions and increasing biofuel production that drove commodity speculation. That interrelationship escaped most people’s purview, but I have to believe the situation at least partially illuminated the connection between farm output and those forces outside of farmers’ control.

In other words, when food prices rise, don’t blame the people who grow the commodities from which your food is made.

 

To Read More...



Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


348 Square Baler

A faster plungerhead (93 strokes per minute) and a heavy-duty bale case with adjustable side doors makes this the ideal ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Leads to Insight