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Non-Cattle Specific Topics
Coffee Shop
Speculators are necessary
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<blockquote data-quote="novaman" data-source="post: 799901" data-attributes="member: 2744"><p>I am far from an expert on trading and that sort of stuff but this statement is very accurate in my opinion. Supply and demand change gradually over time. There may be some shocks to the system but I don't believe it is anything earth shattering. Speculators on the other hand can and have driven huge scares that made a huge mess not only in the domestic markets but internationally. My best example would be wheat back in late 2006 into early 2007. There was this huge scare that wheat stocks were running razor thin worldwide and the price of wheat shot up over $20 per bushel. Within days the price tanked as fast as the trading rules allowed only to fall back to around $5 later that same year. Now I can't pin it ALL on speculators but I am willing to bet a large portion of that price surge was directly tied to speculators. It created a huge over supply as that year there were record acreages of wheat planted. Who knows how far that has resonated since then. There may have been more corn planted and less wheat and things would have stayed relatively smooth over the past years. I understand that there are instances where speculators may help the market but more often than not I believe they only serve to create greater volatility.</p></blockquote><p></p>
[QUOTE="novaman, post: 799901, member: 2744"] I am far from an expert on trading and that sort of stuff but this statement is very accurate in my opinion. Supply and demand change gradually over time. There may be some shocks to the system but I don't believe it is anything earth shattering. Speculators on the other hand can and have driven huge scares that made a huge mess not only in the domestic markets but internationally. My best example would be wheat back in late 2006 into early 2007. There was this huge scare that wheat stocks were running razor thin worldwide and the price of wheat shot up over $20 per bushel. Within days the price tanked as fast as the trading rules allowed only to fall back to around $5 later that same year. Now I can't pin it ALL on speculators but I am willing to bet a large portion of that price surge was directly tied to speculators. It created a huge over supply as that year there were record acreages of wheat planted. Who knows how far that has resonated since then. There may have been more corn planted and less wheat and things would have stayed relatively smooth over the past years. I understand that there are instances where speculators may help the market but more often than not I believe they only serve to create greater volatility. [/QUOTE]
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Speculators are necessary
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