I am writing in response to Clive Black’s Second Opinion ‘Is food speculation a good thing?’. Yes it is.
When an investor looks at whether to invest in a futures position, they are making a judgement over whether the current price accurately reflects likely future demand. If it does, they will leave it alone. If it does not, they see an opportunity to make money and invest. This increases the futures price.
While speculators personally profit if correct, so does society as a whole, as their (usually) correct prediction of increased future demand leads to increased supply due to the utilisation of land, labour (or whatever) that would not have been pro table at a lower price. They are the budgie down the mine.
Jonathan Goldsbrough, assistant to feed purchasing manager, Noble Foods