Farm Ministers Call for Commodity Market Regulation
French leaders blame financial speculators for rise in food prices
June 24, 2011
In this July 9, 2007 photo, traders in the S&P 500 Futures trading pit watch quote boards at the Chicago Mercantile Exchange in Chicago.
Wild swings
Woody Barth has been farming and raising cattle in North Dakota for about 30 years. He says he always looked to the commodity markets for stability. But that's changed in recent years.
"We've seen a lot of wild swings in the market," says Barth. "I mean, a day of five cents up on the corn market, 10 cents up on the wheat market, up or down, was a big day five, seven years ago, 10 years ago. But that's a quiet day nowadays."
Corn, or maize, has hit its 30-cent one-day trading limit 51 times so far this year on the major U.S. grain exchange. That's up from 36 times in all of last year.
Avoiding these wild price swings is one reason why farmers and food makers are in the commodity markets to begin with. They can set prices today for crops that are still in the ground.
Transferred risk
That lowers the risk that weather or other factors beyond their control will push prices up or down come harvest time, says economist John Anderson with the American Farm Bureau Federation.
"There are so many things we don't know. And so, the people who are involved in these markets face tremendous risk. And the whole point of these markets is to allow a way for that risk to be transferred."
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