Americans hoard food as industry seeks regs
Americans hoard food as industry seeks regs
By Patrice Hill
April 23, 2008
A farmer harvests his corn crop near Morris, Ill.
Farmers and food executives appealed fruitlessly to
federal officials yesterday for regulatory steps to
limit speculative buying that is helping to drive food
prices higher. Meanwhile, some Americans are stocking
up on staples such as rice, flour and oil in
anticipation of high prices and shortages spreading
Their pleas did not find a sympathetic audience at the
Commodity Futures Trading Commission (CFTC), where
regulators said high prices are mostly the result of
soaring world demand for grains combined with high
fuel prices and drought-induced shortages in many
The regulatory clash came amid evidence that a rash of
headlines in recent weeks about food riots around the
world has prompted some in the United States to stock
up on staples.
Costco and other grocery stores in California reported
a run on rice, which has forced them to set limits on
how many sacks of rice each customer can buy.
Filipinos in Canada are scooping up all the rice they
can find and shipping it to relatives in the
Philippines, which is suffering a severe shortage that
is leaving many people hungry.
While farmers here and abroad generally are benefiting
from the high prices, even they have been burned by a
tidal wave of investors and speculators pouring into
the futures markets for corn, wheat, rice and other
commodities and who are driving up prices in a way
that makes it difficult for farmers to run their
"Something is wrong," said National Farmers Union
President Tom Buis, adding that the CFTC's refusal to
rein in speculators will force farmers and consumers
to take their case to Congress.
"It may warrant congressional intervention," he said.
"The public is all too aware of the recent credit
crisis on Wall Street. We don't want a lack of
oversight and regulation to lead to a similar crisis
in rural America."
Food economists testifying at a daylong hearing of the
commission said the doubling of rice and wheat prices
in the past year is a result of strong income growth
in China, India and other Asian countries, where
people entering the middle class are buying more food
and eating more meat. Farm animals consume a
substantial share of the world's grain.
U.S. wheat stocks are at the lowest levels in 60 years
because worldwide consumption of wheat has exceeded
production in six of the past eight years, said U.S.
Agriculture Department chief economist Gerald Bange.
Adding to tight supplies was the back-to-back failure
of two years of wheat crops caused by drought in
Australia, a major wheat exporter, he said.
In addition, the diversion of one-third of the U.S.
corn crop into making ethanol for vehicles has
increased prices for corn and other staples such as
soybeans and cotton as more acreage is set aside for
Farmers also have raised prices because they have been
hard hit by spiraling energy costs, which not only
raised the price of diesel fuel to records of over $4
a gallon but drove up the cost of nitrogen fertilizer,
which is made from natural gas.
"Commodity prices across the board are at levels not
experienced in many of our lifetimes," said CFTC
Chairman Walter Lukken. "These price levels, along
with record energy costs, have put a strain on
consumers as well as many producers and commercial
participants that utilize the futures markets to
The upswing in prices has been exaggerated by the
massive influx of investors and speculators seeking to
profit from rising prices for corn, wheat, oil, gold
and other commodities. Big Wall Street firms and hedge
funds have taken huge positions in futures markets
that once were dominated by relatively small operators
such as farmers and grain-elevator owners.
Small investors, who see fast-rising commodities as
good hedges against inflation and a falling dollar,
also are getting a piece of the action by investing in
index funds that are tied to commodity prices.
"During such turbulent times, it is tempting to shoot
first and ask questions later," Mr. Lukken said, but
he contended the commission should be "cautious" about
doing anything to curb speculation. He and other
regulators argued that speculators add volume and
liquidity to the markets, which makes them operate
more efficiently and helps farmers and other players.
Commissioner Michael V. Dunn said the soaring demand
for food and fuel worldwide might be leading to
permanently higher food prices, both domestically and
"We may already be working under or fast approaching a
new paradigm of higher agricultural prices," he said.
"There is not a silver bullet or single solution to
address the problems we are currently facing."
Federal market regulators say the soaring price of
most commodities over the past year reflects increased
demand rather than investor speculation.
Crude oil 82
Live cattle -7
* On the Chicago Board of Trade
Source: Commodity Futures Trading Commission