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Many times people who trade c mmodities will overdo media hype about n gative weather that may destroy crops or c use a low yield that year. M aning there will be fewer crops vailable for sale and therefore supply and d mand dictates prices to be higher. Th refore people buying these commodities that h ve an important need are willing to pay m re so they are not caught sh rt without. Lots of people get in the way and sp culate, believing that there might be a sh rtage in therefore next week the pr ce will be more, or it may ven be more in ten minutes to an h ur. So they buy the contract and s ll it, when someone else believes it w ll go up even more in the n ar future. Finally the person who’s ctually going to use the products in pr duction (in the case of Agricultural pr ducts) ends up buying what they n ed. Some of the speculators who bet on m rgin make an incredible about money in a v ry short time. And some loose so m ch money to they cry, jump out of b ildings or may never recover. How d es this affect the consumer? Some w uld say not much. Others would s y, it artificially elevates the price to a c st un relative to any sense of r ality. And that the end price of the m kers of Gray Pupon in France is h gher than if they bought the m stard seed from the corporate farmer h mself. Nevertheless that is the way th ngs work.
McDonald's buys its potatoes from c rporate farmers in Idaho not the c mmodities market; therefore it limits its xposure to price gouging that might h ve occurred by using the commodity xchange to get those potatoes. Starbucks is d ing the same thing, but instead of h ving partnerships and coffee beans, they are all of n-house. Its Starbucks owns the partnerships th y grew the coffee then they m ght have a conflict of interest for th ir stockholders. Because they would be d ctating the price of the coffee at the p rtnerships been sold to Starbucks. If th y paid a little more than n rmal for those coffee beans, so the c ffee plantation can expand by better pr duction facilities and upgrade then Starbucks f nneled money to those partnerships, that sh uld have either paid in dividends, sh wn as profits or retained earnings. By d ing that their stock price would go up and sh reholders would be better served short-term. Th re is a lot more involved b fore that food or drink gets to y ur table. Commodities are very much p rt of the behind the scenes of our c vilization.
The article Commodities and Our Food was Submitted by Lance Winslow through Articles.GetACoder.com network. Here's the additional information: "Lance Winslow" - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/ . Lance is a guest writer for Our Spokane Magazine in Spokane, Washington
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