Speculating on Food

It was a bad year for winter wheat in China, and this is not doing anything to alleviate the concerns about global food prices. Read about it in the Washington Post here.  Also, watch this interview with Abdolreza Abbassian, senior economist at the United Nations' Food and Agriculture Organization.  In particular, note the discussion (around 2:04) about how investors can make money off the situation.  Abbassian brings up the topic of what he calls "investment tourists".....speculators who invest in food (or really a financial derivative representing food) with the  pure hope of turning a profit.  These speculators have been part of agriculture (probably since its invention) but at least since the development of modern futures markets, and there are a lot of reasons to think that they have had a generally positive impact on the livelihood of farmers and the availability of food.  Yet, there is growing concern that an increasing reason for the recent spikes in food prices is irrational speculation by investors rushing into the market and driving up the price in a speculative bubble. One of the purest examples of this was the great Dutch tulip mania of 1637.  Some see the current mania for gold as another classic bubble.  However, unlike gold or tulips, investor driven irrational spikes in food prices have a very real negative impact on all of our lives....in particular the poorest people on the planet.  But then again, maybe its not speculators, but something more profound like global warming.  Check out this article by Economist and NYT columnist Paul Krugman.