Chicago
Mercantile Exchange
Chicago Board of Trade
Adam Smith used the term "invisible hand" in "The
Wealth of Nations" to represent his idea that if consumers
and producers just followed their own selfish interests without
government interference the economy would develop in everybody's
best interest as if by magic. Unfortunately, the invisible hand
expressed by the commodity markets doesn't seem to care much about
the negative costs of declining family farms, rural communities,
and the rural environment.
Nevertheless, the question on almost every farmer’s mind
is: "What are the markets doin'?" Because of the global
reach of corporations like Cargill and Smithfield, together with
the World Trade Organization and free trade agreements, farmers
from around the world must now look to futures exchanges like
the Chicago Board of Trade and the Chicago Mercantile exchange
to get their answer. It's usually not a very pleasant answer since
prices are often below their cost of production and their only
logical response is to try to produce more the next time around.
Farmers producing livestock or other perishable commodities must
take the market price or let their products spoil. If prices ever
do go up from unforeseen weather or political events, the multinational
processing and export firms can lay workers off, close down plants,
or use monopolistic market presence to manipulate the markets
until prices return to "profitable levels."
Multinational corporations use captive supplies of livestock
(owned or controlled by processors) to assure adequate production
while family farmers and ranchers sacrifice everything to stay
in business. Very few farmers actually "hedge" their
prices on these exchanges, and even if they did, their participation
would have absolutely no bearing on this "price discovery"
mechanism that delivers cheap products to multinational corporations
and lets society absorb the external costs to our land, water,
and rural communities.
