Another says, “With both China and India growing at breakneck speed, it’s hard to see how supply will ever be able to keep up with demand across a whole range of raw materials”.

Julia Finch of The Guardian of London reports grain traders as saying that a “structural shift is underway”. Price of corn and wheat have risen 60 per cent this year, driven partly by the shift to bio-fuels in several countries. Oil and metal prices are also on a high. And again, grain merchants worldwide are pointing to “burgeoning demand from

China and India”. Drastic swings in climate have also affected crops across several continents, triggering off shortages. For instance, an unusual drought in Australia has hit production and pushed up global wheat prices.

This is a perfect situation for hedge funds to jump in and make a killing by driving prices even higher. As Finch puts it: Another force behind the recent price rises has been an influx of more speculative investors - including hedge funds, institutional and even retail investors. They trade aggressively, increase price volatility and are bringing a whole new meaning to the phrase ‘bet the farm’ —commodity index funds are another set of investors hoping to profit from a commodity boom.

In India, where foreign investment is not yet permitted in the commodities market, it is rich farmers together with capital market speculators who are jumping into commodity speculation and actively ramping up prices. A lot of the trading and hoarding of physical stock is funded by political slush funds. So brazen are the operators that they are even attempting to drive up prices of commodities such as maize and guar gum in the futures market through spot purchases, despite a bumper yield in both the commodities. Ironically, guar gum, an icecream additive is among the hottest contracts on India’s commodity futures market and accounts for a big chunk of turnover.

... contd.