Rice Price Dice

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Good Afternoon,

Gold prices rose more than 1.5% for the second time this week, as the dollar came off its high against the euro following the ECB's decision to stand pat on interest rates. As expected, strong anti-inflation jawboning was present in the post-meeting language although traders see the central bank eventually caving on rate the issue as the group's economies slow. Crude oil did not pull off a fifth day of gains after having reached nearly $124 per barrel, as OPEC pointed out that supplies are 'ample' and as growth in the US and Europe slows.

At last check, black gold was quoted at $122.60 per barrel, while the greenback was trading at 73.47 on the index. Jim Rogers was quoted in Singapore today to have said the he expects a dollar rally as too many remain bearish on the currency at the moment. He also expects the greenback to further erode in its role as the global reserve currency and expect China's yuan to be of growing importance.

New York spot gold reached as high as $886 before tracing back to near $881 in the afternoon hours. In the meantime, US consumers tried their best to cope with rising energy costs by...going shopping. Mind you, they did so at big-box stores, and sought out the deepest of bargains. Jobless claims fell on the weekly report although continuing claims were at a four-year high of 3 million. Silver rose 20 cents to $16.80 while platinum added a very healthy $60 to $2020 and palladium gained $7 to $434 per ounce.

We reported yesterday on the price distortions in many a commodity of late. We sounded opinion on the likelihood of market intervention. High oil prices and obvious Western hedge fund speculative activity notwithstanding, the Canadian Economic Press reported this morning that:

"The Forwards Markets Commission (FMC), India's commodities market regulator, said in a public service announcement on Thursday that it has suspended domestic futures trading in selected commodities for four months, with immediate effect, in a bid to curb inflation.

The commodities named by the FMC are potatoes, refined soya oil, rubber and gram. Their existing contracts closed at Wednesdays closing prices, it added. The announcement follows an earlier suspension in futures trading of wheat and rice. Outside of political circles, local market observers have criticized the decision, especially as the governments own committee, appointed to probe the effect of futures trading on commodities, said it had not found any evidence of prices in the futures market affecting spot prices of commodities.

However, Indian Finance Minister Palaniappan Chidambaram said on Monday that "the pressure is to suspend a few more food articles. If rightly or wrongly, people perceive that commodity futures trading is contributing to a speculation driven rise in prices, then in a democracy you will have to heed that voice."

Inflation in India rose to a fresh three-year high of 7.57% for the week ending April 19, making it the fourth successive week that the countrys Wholesale Price Index has stayed above both the 7% mark and the Reserve Bank of Indias revised target of 5.5% for 2008."

Not everyone agrees that banning trading is the solution to the problem. Half a world away from India, in Chicago, sits John Casey, the rice pit chairman at the CBOT. He has seen the gambling dice being thrown by speculative funds in this market - from front row, center. Marketwatch reports his take on the recent situation in rice prices:

" Casey explained that the traders and other followers of agricultural commodities began to notice about a year and a half ago that several factors were coming into play that would cause a squeeze in supply of rice and other agricultural futures at a time when demand was rising in places like China and India.