Food Price Follies: The Grownups Step In

Farmer Brown here…

You really have to second-guess any society that allows a handful of lunatics to wildly speculate in something so vital as the price of food.  I’ve been long every single food-related and agricultural play in the market you could think of for over a year now (search my site, I own this trade), I’m certainly not about to hate on ag-related investing.  But double-long agriculture commodity ETNs is probably where we might want to start drawing the line.

With major mainstream media outlets talking about food prices everywhere you look now, big bank speculators and futures exchange officials have to know that they are the next target of public wrath.  Apparently they do as position limits and grownup behavior on the part of Deutsche Bank and the CFTC have led to this announcement:

Deutsche Bank suspended “further issuance” of the PowerShares DB Agriculture Double Long Exchange Traded Note (NYSEArca: DAG), but noted that redemptions of the notes won’t be affected by its decision, which is effective immediately.

Deutsche Bank didn’t provide a reason for its decision in a press release, and an official at the bank in New York declined to comment beyond that statement. However, industry sources believe exposure the ETN was holding to corn, wheat, soybeans and sugar futures was nearing limits that might attract the attention of regulators at the Commodity Futures Trading Commission. Halting of creations was a way for Deutsche to avoid any regulatory problems.

Let me tell you something, Chooch…the last thing a German-Wall Street investment bank wants to do here is be caught driving up the cost of food and clothing fibers with leveraged anything.  Especially one of the most notorious players from the credit crash.

The torches and pitchforks may have been put into cold storage as the economy rebounded, but trust me, the villagers know where they left them.

Source:

Deutsche Suspends Creations on DAG (Index Universe)