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No electronic or mechanical reproduction of the Farm and Food File is permitted without direct consent of the author. Week beginning Sunday, Oct. 21, 2012 High speed crazies If it’s a bad idea to play with matches, it’s an even worse idea to play with a blowtorch in a fireworks factory. And yet that’s just what farmers and ranchers do every time they price their cattle, corn, cotton and other commodities in global markets dominated by “high frequency trading” (HFT), trading driven by computers running algorithms developed by money-managers who don’t know cocoa beans from soybeans and don’t care. These supersonic freaks of finance, blogger Tyler Durden explained on the Zero Option website Oct. 2., “stuff quotes, front run each other, spoof, layer, and generally make a mockery out of the thing formerly known as the market.” That these lightening fast, fabulously large, mostly unseen and nakedly speculative trades move markets is no secret; more than 100 recent academic and government studies have fingered them as the main driver in today’s neck-breaking price moves. Nor is it a secret that banks, big agbiz and traders are greasing every skid in Washington, D.C. to ensure every attempted regulation of this Big-Boy-in-the-Dark game will be fought in Congress and challenged in federal courts. Three items nearly guarantee their success in this fight: money, money and money. First, high frequency trading now generates enormous revenue for futures exchanges. According to the financial services company Raymond James, nearly 32 percent of all 2011 revenue at the Chicago Mercantile Exchange came from HFT. On the New York Stock Exchange, HFT was tied to 21.4 percent of all 2011 revenue, on the Nasdaq 17 percent and the on Chicago Board of Options, 22.4 percent. As such, HFT, regardless of its danger, is a cash cow that provides billions in exchange and trading profits to the money hawks while delivering less safe, less stable and less efficient markets to you and me. On Oct. 16 the Wall Street Journal chronicled the latest version of the HFT game, recent hard-to-explain prices in the natural gas futures market. Called “‘banging the beehive,’… high-speed traders send a flood of orders in an effort to trigger huge price swings just before the (federal government’s weekly gas supply and demand) data hit” the market. The cost to this fake market-making is measurable. “(I)ncreased action… is spooking some veteran traders. That could leave the market reliant on computerized trading and potentially reduce liquidity.” If you think someone should do something about this madness someone is. Under Dodd-Frank financial reforms, writes Senior Policy Analyst Steve Suppan on the Oct. 10 “Think Forward” blog at the Institute for Agriculture and Trade Policy, the Commodity Futures Trading Commission has “set limits on… commodity contracts (that) can be held by any one entity and its affiliates… to reduce or prevent financial speculation in excess of the liquidity needs of the commodity producers.” Those CFTC rules were to be in place Oct. 12. On Sept. 28, however, U.S. District Court Judge Robert Wilkins declared the CFTC had “misinterpreted” the Dodd-Frank mandate. He “nullified the rule,” notes Suppan, and essentially ordered the CFTC to conduct a cost-benefit analysis of it. Suppan believes the Wilkins’ ruling effectively kills new oversight of high frequency trading and its hand-in-glove partner in market volatility, unregulated over-the-counter derivative trading. (Supporting documents are posted at http://www.farmandfoodfile.com.) That’s great news to Big Agbiz and bad news for anyone who relies on open, transparent markets. When only a few major players have better or more complete market information, the many who don’t are sure to be skinned. And we were in 2008. Since that derivative-driven global market crack-up, other market scandals have cost you and me billions… MF Global, Peregrine Financial, the banker-cooked London Interbank Offered Rate to name the big ones. Without new trading rules, more are certain to come. Call me crazy, but everything about these high speed crazies demands more regulation, not less, and Congress needs to support the law it passed, Dodd-Frank, before we’re all, again, just a bunch of beaten-up bees. Week beginning Sunday, Oct. 14, 2012 Organic by another name… like science In most public policy debates everyone favors “science” until science begins to favor one side over the other. When that occurs science, suddenly, isn’t so hallowed and name-calling soon takes over. Rare, however, is the instance when an apparent winner in a science face-off uses so much name-calling during a victory lap that the intended loser turns the table. But that’s exactly what played out last month in the New York Times. It was a lesson on how poor results can come from good science and how good food can be made to look bad. The spat began Sept. 4 when Stanford University’s Center for Health Policy published a paper in the Annals of Internal Medicine that, according to the Times, “concluded that fruits and vegetables labeled organic were, on average, no more nutritious than their conventional counterparts, which tend to be far less expensive.” The Stanford study—actually a “meta-analysis,” not new research but a statistical compilation of 237 previous studies —went on to note that organic food was not “less likely to be contaminated by dangerous bacteria” nor were than any “obvious health advantages to organic meats.” Those two points made the lead of every print and broadcast story on the report. What didn’t make the news, though, is a key shortcoming of meta-analyses; in this case, using widely-varying data from 237 separate papers to arrive at one conclusion. That process is akin to measuring 237 men, women and children to determine the appearance of a “human being.” The resulting average might be mildly representative of you and me but it would be wildly inaccurate when compared to you and me. Facts like that didn’t bother Times columnist Roger Cohen, whose Sept. 6 piece on the Stanford work, titled, “The Organic Fable,” labeled all organic food as a “fad.” He went to say organic food is “premium branding rather than science,” and likened its usually higher price to parents paying tuition “to send (their) child to private school.” “It is a class-driven decision,” Cohen wrote, “that demonstrates how much you love your offspring but whose overall impact on society is debatable.” Not so. Parents pay extra for both private schools and good food because they believe—even have proof—that the investment carries value. Both Harvard and organic growers count on people making informed choices that favor their product, be it Ivy League or organic spinach. Besides, if Cohen’s reasoning has merit, everyone should drive $18,000 Ford Focuses rather than $50,000 Cadillac XTSs or $60,000 Range Rovers. After all, cars are cars and choice—or class—should play no role, right? But that’s not how it works in a free society and free market. As the columnist, himself, noted, “In 2010… organic food and drink sales totaled $26.7 billion in the United States, or about 4 percent of the overall market.” So choice, class, has its place. While “organiacs,” the name Cohen gave organic supporters, went after him with forks and knives, medical doctors, nutritionists and ag economists—the latter two were not on the Stanford panel that compiled the meta-analysis—responded, also. One was Chuck Benbrook, research professor at Washington State University’s Center for Sustaining Agriculture & Natural Resources, who says he “may be the only person on the planet that actually read more than 200 of reports used by Stanford.” After reading the Stanford paper, Benbrook labeled it either “a very shallow, questionable analysis” or a “naïve, sloppy job… cleverly or intentionally designed to raise questions where none existed” about organic production and food. Cohen responded to the criticisms by Benbrook and others with another column Sept. 27 that, to his credit, listed “several good points made by my critics.” Soon, however, he returned to taking pot-shots at the “organic bourgeoisie, with their babies in reusable cotton diapers… inveighing against genetically modified food.” Wow, now that’s clever name-calling. What it isn’t, however, is science. So score one for the bourgeoisie and the farmers and ranchers they support. Week beginning Sunday, Oct. 7, 2012 Falling Somehow a notice went out a week ago to all the blue jays in Illinois that the acorns on (what I think is) a shingle oak outside my office were ripe for the picking. Within hours a dozen or more jays appeared in the tree’s top branches to pluck, shuck and consume the soft fruit of the slick-leafed tree. Now, four or five days after the blue jay Woodstock began, the ground under the tree is a carpet of acorn hulls and caps that crunch—with an almost delicious snap—beneath my steps to and from the mailbox. That’s what fall sounds like this year. Snap. Crackle. Squawk. The jays didn’t come alone. Fat-cheeked ground squirrels, feasting on the nutty debris field, arrived a day thereafter. A month ago nary a one showed its buck-toothed face; today they must be texting and tweeting to every brother, sister and cousin to come share the fat times because the squeaking varmints dash and dart everywhere. Old Maggie, the farmette dog, cares little about the critters that threaten the rule of her mild kingdom. Age and aches take her slowly from one sunny part of the yard to another for long, hard naps in the autumn’s just warm-enough sun. Increasing deafness promotes her slumber, too; the less she hears the more she dreams. Most late afternoons, however, Maggie is rested enough for a walk in the woods. Like other seniors in the neighborhood, though, a sinking sun calls her home to where warmth, supper and more sleep await. On warm days an open back door brings the sounds of another corn and soybean harvest. At night the steady whine of grain dryers provide a one-note symphony that crickets and the neighborhood owl occasionally harmonize to. Later, a rising, weak moon adds a silky glow to the unerring concert. Few predicted a colorful fall, yet the maples, hickories and ash are awfully showy for all the heat and dryness they endured this spring and summer. They turned yellow, red, gold and plum earlier than in past years and will, I reckon, become bare-branched earlier, too. That’s fair; April arrived in March so if November arrives in October some sort of seasonal balance will be restored. Today’s damp, cool morning turns my attention to the winter’s woodpile. A long wall of aged, split red oak—too good, really, to burn in the fall—stands ready, a one-minute wheelbarrow ride from the upstairs stove. Nearby another long, deep stack of oak, elm and hickory sits under roof as it await its hot fate in the downstairs stove. It is dry and beautiful and I can smell the hickory as I walk past the small, open-faced shed. That wonderful, earthy aroma takes me homeward, and 50 years backwards, to the same thoughts I had as a child on the early morning bus rides to school. That bus—before books filled the hour-long rides a few years later—was a magic carpet that carried me through hills and hollows and towns and fields I’d never seen, and everyday I was absolutely thrilled to climb aboard to see it all again. Fall mornings, like this morning, were the absolute best to be on that bus because the sights and smells—steam-breathing cattle casually chewing as we lurched by, barnyard chickens scattering as children raced toward us, dew-draped corn pickers waiting to go back to work, beat-up pick-ups at the end of dusty lanes packed with sulky teenagers, a whiff of burning coal—were almost too much for a young boy to take in. Today, however, they’re just enough to make an aging observer smile as another year’s maple leaves drift on a gentle breeze toward an aging, resting dog who dreams not of corn yields or needed rain or national politics. She just rests in the beauty of another glorious fall day. Smartest dog I ever did see. shapeimage_2_link_0
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