Thursday, June 19, 2008

Food for fortune

On my way to home today, I read a very interesting article about recent year's hikes in food prices.

As with cases for oil and gold and other metals, food prices have been going up like mad recently. Many believe food should not be a vehicle to draw profits. But the author for this article has a slight different view.

The author says, speculators - hedge funds, big investment institutions, etc. - help offset imbalances between supply and demand that could take place in future, saying they act like old governments who bought food when the food price was too low due to excess supply, and sold food when food price was too high when it was a bad harvesting year. It's a different, yet interesting point, isn't it?

One other interesting point. He says, due to increased spending power and living standards of the people of China and India, they will still want and buy food even when the price goes up, thus helping the price to stay high. In the old days, it used to be that Chinese and Indian people just ate less when the food price was going up (and less demand for food overall), thus driving down the price.

Here is the link to the article.

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