India Culture, Business, Sports and Food. Get all the buzz in India now

High food prices around the world? Blame - at least in part - the investors who moved their money into commodities in the past five years, looking for better returns than they were getting from stocks and bonds.

Global investment funds saw the potential for profits in commodities outstripping those from the stock market, and from 2002 started diving into oil, followed by metals and then grains.

This move was fueled by falling interest rates in major economies, which make fixed-income investments less attractive, and a weak dollar, which tends to drive up the price of dollar-denominated investments such as most grains. These in turn attracted investors with little or no connection to the grain market often labeled as speculators, who took corn, soybean and wheat prices to a whole new altitude.

In March, corn futures hit a record $5.88 a bushel and, soybeans $15.86-3/4 on the Chicago Board of Trade, the benchmark for world prices. CBOT wheat peaked at $13.49-3/4 a bushel in February.

Stung by high transportation costs from record oil prices, food makers have passed some of the high crop prices to consumers, leading to protests in many countries. Some nations have even withheld grain exports to guarantee domestic supply.

Investors say high prices are supported by fundamental supply-and-demand factors like a higher protein diet in emerging economies like China, demand for bio-fuels made from corn, soybeans and palm oil, and drought in some important grain exporting nations. But investors bear at least some of the blame, economists say.

The idea is there are a lot of new players in the commodities-futures game and those new players don’t necessarily have a vested interest in the market beyond the speculative interest. Although agricultural commodities trade on fundamentals like harvest reports, they have become more volatile due to the influx of new money. With speculation it means it tends to move much sharper than it did in the past.

Unfortunately, when people are trading commodities, I don’t think they are even caring about social impact. What these people do is invest and their job is to make money. If they think something’s going to go higher, they are going to trade on it. They’re not going to be worried about repercussions somewhere else.

As recession talk swirls in the United States, some say the outlook for stocks and bonds may not be as bright as for commodities. Investors are likely to see negative US GDP from here and they have 65 to 95 pet of their assets in stocks and underperforming assets.

They’ve no choice but make an allocation to something’ that’s at least participating. On the long side, it’s commodities at the moment. A long position is a bet that prices will go up, while a short position is a bet that prices will fall. Traders said the weight of long investors has crowded the space between producers and consumers in grain markets, which are much too small to handle the influx.

Total trading volume for a day in CBOT corn, soybeans and wheat is less than 1 per cent of the $3 trillion traded each day on the global foreign exchange market. And the combined value of the US corn, soybean and wheat crop for last year was just $92.51 billion. By comparison, outstanding US Treasury bonds total about $4.6 trillion, arid the market capitalization of U.S. stock markets is about $16 trillion.

The US imported $36 billion worth of crude oil last month. If oil exporters then used this money to buy our wheat, they would have enough money to buy the entire US crop.

Investors also say the farm sector is partly to blame for failing to invest enough in production over the past five years. With the US credit squeeze getting worse by the day, securing borrowings has become harder for farmers in the world’s biggest grain exporter.

Adding to the mix is the race to make bio fuels. The United States has a mandate to produce 9 billion gallons of ethanol, made from corn, this year and 10 billion gallons in 2009.

Given the varied factors at play, blaming hedge funds and other speculators for current commodity prices may not be fair. When the fast money crowd sees things moving, they want to jump on. Until the bubble kind of bursts.

Spiraling food and commodity prices pushed the inflation rate to a worrisome 7 per cent and a concerned government, confronted with major supply constraints, threatened to come down heavily on hoarders. The latest price data released on Friday showed that the Wholesale Price Index (WPI) reached its highest since December 2004.

The rate of inflation in the previous week was 6.68 per cent and 6.54 per cent in the corresponding week a year-ago. Commerce and Industry Minister Kamal Nath warned that the government would come down heavily on those found to be involved in hoarding and profiteering. “We will not hesitate to take the strictest measures, including using legal provisions, against hoarding and profiteering, whether in food, cement or steel,” Nath said.

The Centre has already empowered state governments to impose stock limit orders on essential commodities to check hoarding. Earlier this week, the government announced a slew of measures, including import duty cuts on edible oils and a ban on export of non-basmati rice.

Experts cautioned that the price situation was unlikely to ease in the near future as a shortage of food had pervaded the world economy. Record prices of rice and sky-high oil have stirred up inflation worldwide, prompting many governments to impose price controls and curb exports of essential goods.

In India, during the week ended March 22, prices of fruits and vegetables, pulses, cereals, eggs, meat, fish and edible oils went up, while condiments and spices were cheaper. The mineral category index shot up by 38.2 per cent, primarily driven by a 46 per cent rise in the prices of iron ore.

Inflation is in an accelerating mode and we are yet to see any signs of its softening. While the government has taken some measures: I would not be surprised if the Reserve Bank of India (RBI) increases interest rates further. The RBI will announce its slack-season monetary policy this month and many analysts expect the central bank to raise interest rates to tame inflation.

ICICI Bank Managing Director and Confederation of Indian Industry (CII) Vice-President K V Kamath felt India’s economy would continue to grow at a fast clip despite inflation. “The present inflationary spiral is a pure supply-side phenomenon and not due to overheating in the economy,” Kamath said.

India’s gross domestic product (GDP) is estimated to grow at a slower 8.7 per cent in 2007-08, after clocking 9.6 per cent in the previous year.

Your monthly expenditure will go up, your groceries will cost more and your disposable income will buy less for the same money. Retailers will pass on the rise in wholesale prices to consumers.

Your home loan rates may shoot up. The Reserve Bank will take steps to tighten money supply. This will either stop interest rates from falling - or could even make them rise to curtail overall demand in the economy.

Your salary hikes may be curtailed. When inflation goes up, your employer’s costs go up and to save money the employer may reduce or hold back your pay increases

Growth may slow - and so will job prospects. Industries put their foot on the brakes or accelerators when interest rates go up. They hire fewer people or take their time to make up their minds on investment plans. This could stagger job prospects.

Your stocks and mutual fund values suffer. It is simple; when economic growth suffers, corporate earnings take a knock and bulls and foreign investors stay away from the market.

Exports may be hit. If inflation goes up, the cost of manufacturing goods or producing services like software in the country goes up. The country’s competitiveness may suffer as a result and export sector prospects in industries like textiles, software and jewellery may be hurt.

Imports will become costlier if the rupee becomes weaker. That makes the government’s oil bill higher, and this could potentially lead to increased fuel prices be in diesel, cooking gas or kerosene. And foreign trips will become tougher as well.

KINGS XI PUNJAB - that’s what the Mohali franchise owned by Preity Zinta and partners will be known as- announced its arrival in a fashion not quite befitting the kings at the PCA Stadium.

The setting in the first place wasn’t exactly royal - the venue had to be shifted at the eleventh hour from the scheduled Sector 17 to the PCA stadium- but the bubbly and energetic Preity Zinta, the powerful theme song by Punjabi pop star Daler Mehndi and the dashing Yuvraj Singh, Irfan pathan and Sreesanth made the occasion king size with their never-say-die spirit and attitude.

“We wanted to launch our team with the people at people’s place in Sector 17. Unfortunately, the local authorities feared it could cause huge chaos as thousands of people wanted to come for the launch. So we had to shift the venue and put up alternative arrangements within two and half hours, and still we have put up the show. That’s what Kings XI stands for and you would see our team reflecting the same attitude on the field as well,” said the actress, evoking thunderous applause from the sparse but loud and boisterous gathering.

The effervescent actress, who kept the crowd enthralled with her contagious smile and friendly banter, showered heaps of praises on her team as the players walked on to the stage. “We have this young, dynamic and handsome team. It’s your team and I am sure you will support them,” she said, and the crowd roared in huge approval.

The environment charged up further when the theme song sung by Daler Mehndi was released, lea.ving the people swaying to the inspiring lyrics and vigorous beats. “The song has lot of fire and energy. I am sure it’s going to inspire us to victory in the tournament,” said skipper Yuvraj Singh.

Eventually, the launch rounded off in a typical Punjabi style, with players and Preity dancing on the stage and crowd in the stands to the theme song ‘Kings XI….people of Punjab’.

Captaining a side in the Indian Premier League would be one of the toughest tasks, given the diversity in the teams. But Yuvraj Singh, Kings XI Punjab, sounds pretty excited and is looking forward to it.

“Leading a side having players from various countries is of course quite challenging, but I am looking forward to it. It’s going to be a big learning experience, which will help me in terms of leading the Indian side one day,” said Yuvi.

The Kings XI skipper is quite optimistic about the chances of his team in the tournament. “We have a pretty balanced side and I am looking forward to win the tournament. As a captain, I will have a huge responsibility to do well for the team…! would be putting in my best effort and would expect the same from my team,” he said.

The dashing southpaw doesn’t think extracting the best from the players in terms of commitment will be a problem. “Look all these players are professionals and would be coming from different parts of the world to give their best. I am ‘pretty excited about playing with the likes of Bret Lee and Jayawerdene and I don’t any problem in terms of motivating them,” said Yuvraj.

He, however, admitted it would be a tough to gel together as a team quickly as they would have little time to spend together ahead of the tournament. “It would be slightly tough on that count. A small camp ahead of the tournament would have been ideal, but then we have such tight schedule, making it almost impossible,” he said, before adding that it would be anyway same for all the teams.

Moody, however, said it wouldn’t matter much as he knew most of the international players. “I would be looking be to establish good understanding with the team in the first week, for I think the team which has better understanding and man management would go on to win the tournament,” said Moody.

When asked if he fancied the twenty20 format more than other formats, he said he loves cricket, irrespective of the form. “I give my best, no matter what the format is. Besides, Twenty20 format isn’t just entertainment. You got to be a good player and have good skills to excel in this format also,” he said. .