Blame the speculators

I have a feeling we're going to be hearing a lot more of this as the worldwide commodities boom goes on.

A day after a run on rice in California prompted Costco and other chains to limit buyers to only a bag or two at a time, "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," according to the Washington Times.

In other words, the Commodity Futures Trading Commission is coming under pressure to "do something."

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 businesses.

"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."

In other words, if the CFTC doesn't "do something," Congresscritters will.

And the CFTC seems disinclined to act.

[R]egulators said high prices are mostly the result of soaring world
demand for grains combined with high fuel prices and drought-induced
shortages in many countries…

"During such turbulent times, it is tempting to shoot first and ask
questions later," [CFTC Chairman Walter] 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.

Left unspoken at the hearing, at least judging by this account, is the role of the falling dollar, something even middling UN bureaucrats are able to recognize.

Of course, it's an impolitic time for members of the CFTC to bring up the devaluation of the dollar, given how the people responsible for it could end up being their new masters.