The Financialization of Food

Sasha Breger Bush: In the name of democratizing finance, derivative exchanges are achieving the opposite

[thinkingman]

Man that is exactly what we need derivatives in the food markets...I mean it worked so well in the housing market here in the US. What could go wrong if that bubble were to pop world wide famine...no big deal as long as the banks are bailed out.

[bbanks]

If you think farmers are doing so well. I've got some collateralized debt obligations I think you might be interested in. If you think banks aren't screwing them, then I admire your trusting nature.

[ujean]

It appears that derivatives are necessary for competition - eliminating competition that is.

[leetcheet]

Markets can be manipulated in the short term, but never in the long term. I guess that's where our opinions differ. I still don't think you understand the mechanics behind a derivative contract if you think the farmer will lose getting into one.

[leetcheet]

"peasant farmers can't be apart of a derivatives market"

I'll trade my future rice production for your cow. There is a derivatives contract. Seems to me, people get a little caught up with the word derivative and forget the actual mechanics behind the transaction.

[bbanks]

Why does the 80% matter? The answer is the institutional investor behaves dishonestly. They buy Oil contracts and hold then in tankers in the Ocean to drive up the price of oil. Its hard to explain they are not there to take possession of the commodity. They are there to extract wealth from the system. They have squeezed out of the futures markets the investors, whom the market was created for. This is new institutional investors weren't in these markets at this level prior to the 80's.

[leetcheet]

...If a farmer enters a derivative contract with a bank/person, he gets his money, end of story. He's happy. He doesn't care if the price increases afterward, sure it sucks, but he's already locked in his profit.

[thethegreenmachine]

If they're gonna get screwed before even trying derivatives, they're not dumb. They're desperate.

[bbanks]

We don't actually disagree, there is nothing wrong with a farmer and investor striking a deal, price discovery, . The problem is that if I as the farmer am dealing with you the market maker. You have the ability to manipulate the market so that you always win. It is inherently unfair. Over 100, 000 small farmers in India have committed suicide over the last decade because these contracts have become slavery, that and montsanto but thats another issue.

[sozfan]

derivatives trading appears to be a back-door way to monopolize industries under the guise of free market capitalism. and where does all this money come from in the first place? and why isn't it being used to create jobs and further productivity? perhaps gov't should outlaw derivatives trading until unemployment is reduced below ~3%.

[MrCamiranga]

Thats bad news...What we have to change is the speculation on food by the big guys not making the small farmers speculate instead...its all f...ed up....cya

[bbanks]

Or do you sell them for JPmorgan chase? Is that why you think everything is roses in the derivatives market? I must admit (my former employer). Blythe is that you?

[LordOrlock]

Only Big Agribusiness wins in the current system bro. Its damn hard to be a small farmer, not that there are many left these days.

Banks screw over small farmers in the favor of Agribusiness. Just like in any other industry. If you think otherwise, you need to actually study agriculture more instead of basing your opinions on unresearched assumptions.

[leetcheet]

I don't understand how you think someones dishonestly makes any difference. Can you explain to me how these farmers are being cheated, as you seem to believe they are. Farmers just want to protect themselves from price movement, this is nothing new, and what does it matter if 80% of the trades are institutional investors. They just need someone on the other side of their trade.

[bbanks]

First of all I am never rude or ignorant in any of the conversations I have, So I will ignore your being so. There may have been a time when you were right maybe in the 60's, 70's, early 80's. Today how ever upwards of 80% of all trades in equities, commodities, bond markets are institutional investors. If you think that a small farmer can find an honest individual that he or she can enter into a contract with . It is not me who is being naive.

[leetcheet]

What current system? We are talking about derivatives within the context of agriculture, not the entire argibusiness system(save that for another video). These idiots are talking about taking away derivatives from farmers, AKA their protection from price depreciation. I Don't need to study agriculture to understand how derivatives can PROTECT farmers, this is pretty basic stuff.