[mschuster91]

Trading in commodities futures has a point, but it has gotten absolutely ridiculous in scope. The market participants used to be farm collectives, mining companies on the one and large wholesalers and consumers on the other side as a way for both to hedge against price swings... but that's no longer the case. Hell even if you just look at the last 10 years, trading volume has exploded by ~3x (futures) / ~5x (options) [1] - but there is no economic fundamentals (e.g. production amount of farms or raw material mines) to support this, it's all financial mind-fuckery that skims off billions of "fractions of cents per transaction" and redirects them to a select few very rich people.

This kind of predatory leeching has to stop, once and for all.

[1] https://www.statista.com/statistics/377025/global-futures-an...

[Animats]

There's a lot to be said for this position. Here's an NBER study from 2014 on the financialization of commodity prices. There is substantially more volatility in commodity prices than in the underlying production and consumption. Sometimes, what's happening in markets is going in the opposite direction as the real world commodity.

Another related study.[2] Studies agree that the tail is wagging the dog, but there is no agreement on what to do about it.

[1] https://www.nber.org/reporter/2014number2/financialization-c...

[2] https://americanaffairsjournal.org/2019/11/commodity-financi...

[mschuster91]

> Another related study.[2]

Thanks. JFC, that one was mind blowing:

> Last year, production increased to 30.2 billion barrels, but these futures markets alone swelled to 541.6 billion barrels, becoming eighteen times bigger than the global physical output.

So, to put it clear: on average, before reaching a refinery, each barrel of oil that ends up there changed hands eighteen times, with each step extracting wealth (in the form of buy/sell price spread) along the way - for zero gain for both the producers and the consumers of the oil. And yet, everyone seems happy with it.

> but there is no agreement on what to do about it.

If you ask me personally, the answer is easy: burn the entire thing down and restrict the rebuilt one to actually legitimate market participants (producers, wholesalers and consumers of commodities). The current system serves no real purpose other than to enrich a very few people at the expense of everyone else, which is also the reason why this won't ever happen - the financial incentives and thus the amount of money flowing into corruption and its legal friend lobbying is just too much.

The problem is, you won't get that kind of clear-cut answer from any academic studies or even most political parties outside of the far-left (like me) who criticize it on the very real effort this looting has on poor people and the far-right who tends to focus more on the conspiratorial part. It's in the end a question of political ideology and of how independent science, journalism and politics can actually be when faced with billions if not trillions of dollars of financial interests.

[Animats]

The trouble is, some of the alternatives are worse. Agricultural product buyers who control the path by which products are moved (grain elevators, stockyards, etc.) are in a stronger position than farmers. So they can negotiate prices below the "market" with farmers. There are farmers demanding that the US government require the big buyers (especially Cargill) to use publicly traded markets so they can't squeeze farmers so hard.

There's history here going back to at least 1870 or so.

[mschuster91]

Time to break them up, then. Monopolies are just as bad when they are consuming entities rather than producing (or selling) entities.

[Animats]

Some of them are natural monopsonies. Can a town support four competing grain elevators? Parts of the food chain are operated by agricultural cooperatives, owned by farmers, to get around such physical bottlenecks.[1] This is a complicated area. Much political controversy, dating back over a century.

The farmer position: [2]

The American Enterprise Institute position: [3]

An intermediate position: [4]

[1] https://www.wisfarmer.com/story/news/2021/01/04/snapshot-top...

[2] https://www.wisfarmer.com/story/news/2023/11/13/farmers-are-...

[3] https://www.aei.org/research-products/report/stop-paying-att...

[4] https://www.politifact.com/factchecks/2019/apr/04/elizabeth-...

[mschuster91]

> Can a town support four competing grain elevators? Parts of the food chain are operated by agricultural cooperatives, owned by farmers, to get around such physical bottlenecks.

Yeah, but that's what solid antitrust policies, audits and enforcement are for - at least in theory. Someone has to play police after all, to make sure that everyone can reasonably participate in any truly free market. The problem is that most anti-trust legislation is more aimed at large, nation-scale corporations and even there, enforcement is lacking, but small, regional monopolies/monopsonies or other threats to a free marked are a complete Darwinist world.