Last spring, for the first time in 20 years, Indiana farmer Jim Benham planted his fields entirely with soybean seeds that hadn’t been genetically modified to withstand herbicides.
It wasn’t because the 63-year-old suddenly had embraced the anti-GMO movement. Instead, he was drawn to a nearly 14% per-bushel premium for non-GMO soybeans offered by a local grain terminal, which sells them to Asian feed processors.
Mr. Benham is among a small but growing number of Midwestern farmers moving away from biotech seeds developed by Monsanto Co. , DuPont Co. and other companies in response to lower crop prices over the past two years that have slashed farm profits.
More U.S. consumers are seeking out non-GMO foods, which proponents perceive as healthier and friendlier to the environment. Retail sales of GMO-free cereal, salad dressing, eggs and other food products increased 15% to $9.6 billion last year, among the fastest-growing U.S. food segments, according to market-research firm Nielsen NV. Nielsen sharply increased its non-GMO food sales estimate last year after incorporating a broader range of products and stores….
By Jacob Bunge – Wall Street Journal –
Could rapidly falling oil prices trigger a nightmare scenario for the commodity derivatives market? The big Wall Street banks did not expect plunging home prices to cause a mortgage-backed securities implosion back in 2008, and their models did not anticipate a decline in the price of oil by more than 40 dollars in less than six months this time either. If the price of oil stays at this level or goes down even more, someone out there is going to have to absorb some absolutely massive losses. In some cases, the losses will be absorbed by oil producers, but many of the big players in the industry have already locked in high prices for their oil next year through derivatives contracts.
The companies enter into these derivatives contracts for a couple of reasons. Number one, many lenders do not want to give them any money unless they can show that they have locked in a price for their oil that is higher than the cost of production. Secondly, derivatives contracts protect the profits of oil producers from dramatic swings in the marketplace. These dramatic swings rarely happen, but when they do they can be absolutely crippling. So the oil companies that have locked in high prices for their oil in 2015 and 2016 are feeling pretty good right about now. But who is on the other end of those contracts? In many cases, it is the big Wall Street banks, and if the price of oil does not rebound substantially they could be facing absolutely colossal losses.
It has been estimated that the six largest “too big to fail” banks control $3.9 trillion in commodity derivatives contracts. And a very large chunk of that amount is made up of oil derivatives.
By the middle of next year, we could be facing a situation where many of these oil producers have locked in a price of 90 or 100 dollars a barrel on their oil but the price has fallen to about 50 dollars a barrel.
In such a case, the losses for those on the wrong end of the derivatives contracts would be astronomical.
At this point, some of the biggest players in the shale oil industry have already locked in high prices for most of their oil for the coming year.
By Michael Snyder – The Economic Collapse –