Many in India blame the futures trading in commodities for stoking inflation.
Do they have a point?
Following article shows they do.
DIANA B. HENRIQUES wrote in NYT March 28, 2008:
“…Whatever the reason, the price for a bushel of grain set in the derivatives markets has been substantially higher than the simultaneous price in the cash market.
When that happens, no one can be exactly sure which is the accurate price in these crucial commodity markets, an uncertainty that can influence food prices and production decisions around the world…
… Veteran traders and many farmers blame the new arrivals in the commodities markets: hedge funds, pension funds and index funds. These investors and speculators, they complain, are distorting futures prices by pouring in so much money without regard to market fundamentals…
… What is not happening in these markets is equally mysterious. Normally, price disparities like these are quickly exploited by arbitrage traders who buy goods in the cheap market and sell them in the expensive one. Their buying and selling quickly brings the prices back into balance — but that is not happening here…”
Jaspal Bhatti’s wife Savita Bhatti, guarded by members of the Nonsense Club dressed as commandos, goes to deposit vegetables in a bank locker in Chandigarh on Tuesday April 1, 2008. (PTI)