While in the US speculators and speculators alone are blamed for surging oil prices, in China we get an example of precisely what happens when speculators get caught on the wrong side of the trade. "Farmers across China are suffering from unmarketable vegetables since the arrival of spring, hurt by an increase in output following speculation last year’s surge in demand would continue in 2011... Many farmers blamed oversupply as the main reason for the poor market. Due to climate factors, leaf vegetables from northern and southern China came onto the market almost at the same time, making the supply much higher than last year...Speculators also played a major role in the price collapse, as they dumped vegetables that they had been hoarding onto the market." That's a new one: so speculators are now to blame for a plunge in prices? Of course, the "speculators" themselves merely took their losses, some went out of business, and the PBoC did not rescue any of them. This way the more incompetent of them are now out of business. In the US, on the other hand, where we are now urgently holding our breath for an ES margin hike to hit the tape any second now from the Globex because the silver bubble has now moved back to the S&P ("where it belongs" - unnamed Fed official), all those who would have placed idiotic bets either way would be promptly bailed out by the Fed, especially if they were the prop trading operation of a TBTF toxic laden monstrosity (here's looking at you mother Merrill). Does one see an issue here?
More from Business China
Last autumn during the height of South Korea's kimchi crisis, a number of Chinese agricultural speculators horded vast quantities of cabbage in cold storage warehouses and waited for prices to pick up.
The problem of oversupply was magnified when those hoarders had to move the winter cabbages out of the warehouses and spring cabbages ripened early due to a warmer climate in the north, forcing cabbage stockpiles up.
Some farmers blamed vegetable dealers for aggravating the situation. They said they did not have much say in the prices and the vegetables were sold at prices many times higher than what the dealers had offered them.
"Vegetables cannot remain fresh for long. They are worthless when left behind by the dealers' trucks," said farmer Han Daokun.
"It was vegetable agents plus high logistics and labor costs that resulted in high prices at the consumption end," said Yu Maijian, a worker at a Qingdao vegetable wholesale market in Shandong Province.
Distribution is the key to the problem. Each link in the distribution chain will increase the price by 10%-15% and there are many links, according to Ling Donghua, research fellow at the Shandong Academy of Social Sciences.
Chinese government authorities have stepped in to help the farmers and deal with the vegetable oversupply.
Of course, you mix speculation with amateur central planning (for the real deal look to the US), and you get some very explosive results:
Some supermarkets, schools and company canteens are on a buying spree in east China's Shandong province as the government urged them to help relieve farmers from a glut of vegetables.
Municipal authorities should take immediate action to "help farmers tackle difficulties in selling their produce and maintain a stable market," said a notice from Shandong's commerce department released on April 22.
The Ministry of Commerce (MOFCOM) and the Ministry of Agriculture have also issued a notice to ask local authorities to take immediate action to "help farmers tackle difficulties in selling their produce and maintain a stable market".
So yes, food "speculators" get the bum rap, and Attorney Generals thawed from cryogenic sleep on their ass when they push prices up and now they are scapegoated for sending prices plunging as it puts all those farmers who scrambled to fill the supply void out of a job, following another artificial intervention by central banks to remove liquidity.
Obviously, in the grand scheme of things it is never the broken Keynesian and broken fiat system's fault. Ever.