Really. If you eat peanut butter; stock up today.
A CNN Business story today details the coming peanut butter apocalypse. Last year at this time, the commodity price for a ton of US peanuts was around $750. Today; it's about $1,200.
The reason they give: severe drought and intense heat in the peanut belt last summer, so the crop is down some 13% from last year. Ok. Yes, climate change/climate chaos is upon us, and the economic impacts are already hitting us quite hard. I can easily understand why a 13% decrease in the crop would result in a ~40% increase in the price.
Soon after giving the cheery statistics, they go on to point out what a great opportunity this is for money changers to make a little more profit: Safe Havens; Gold, Yen, & Peanut Butter.
It is, of course, perfectly all right to make all the money you can, any way you can. It's your guaranteed right, actually. Never mind that peanut butter is often the last source of quality protein the poor can afford, and that it's a critical component of the new famine medications urgently needed in Haiti and Africa. Fascinating that the story praising the heroes of Haiti is covered by CNN also.
Here's the math on "investing" in food. Take peanuts, for an excellent example. World production is around 34 million metric tons. In the process of buying the crop from farmers, getting it to the people who process it, store it, and sell it to consumers, the peanuts change hands quite a few times. To facilitate that, and to let processors be certain they will have nuts to process next year, there is a "futures market"; where contracts to deliver peanuts at a certain time, say next July, are bought and sold.
Inside the peanut world, let's just say there are $50 billion worth of peanuts (a made up number with likely not relation to reality.) The peanut processors have, let us say, $40 billion in contracts on the books. Then- after that lovely article in CNN, a billionaire or two, from Argentina, Iraq, India, China- take their money out of oil, which is looking very risky; and use it instead to buy peanut futures. Now, let's say, there are $60 billion in the futures market- all chasing what used to be $50 billion worth of peanuts. The contracts are bought and sold daily- if you can sell the one you bought yesterday at $3/share, and you can sell it today for $3.10 a share- why wouldn't you? And here I am, with $500 million in my pocket I just took out of oil, and I need to buy peanuts- will I pay $3.15? Why yes, I will. The price is going to go up, yes? Everybody says so.
More money in a market, chasing a fixed quantity of commodity, will drive the price up. It's a law of physics that could have been written by Newton. The speculators doing this shriek, when you point at them, and swear they are providing a desperately needed service; more "liquidity" to the markets. It's a transparent self serving lie, of course; the markets functioned just fine a few years ago, when speculative money in those markets was legally restricted. But we believe a great many of those these days, one more won't hurt.
Guess who eventually pays the real money, to pay for all the profits? It's the end user, of course, that's the entire idea. In this case- it's the poor and starving. Literally; the starving.
Nice place we have here. So; better buy yours now. Of course.
It strikes me that getting speculators out of agricultural commodity markets would be a good thing to put on the list, for the Occupy Everything folks. The math is just really clear.