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Perdue targets commodities pricing

Corn a hot topic

POSTED: August 25, 2008 5:00 a.m.
SCOTT ROGERS/The Times

Georgia Governor Sonny Perdue speaks at Wednesday morning's luncheon for members of the poultry industry at the Gainesville Civic Center. Perdue says he's targeting what he calls unfair practices in the commodities market which are driving up corn prices. He's taking his cause to the national stage.

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Gov. Sonny Perdue took direct aim Wednesday at institutional investors he believes are falsely driving up the cost of corn and other commodities.

Perdue’s comments came during a meeting of the Georgia Poultry Improvement Association at the Gainesville Civic Center.

"When you allow in trillions of dollars that we don’t know where it is coming from, it could be from China or the Middle East, you can move these markets and virtually eliminate the price discovery mechanisms for which the commodity markets were formed," Perdue said.

The governor said he does not blame investors who are trying to get a return for their shareholders.

"They have been sold a product by Wall Street and investment banks as an asset or capital class," he said. "Commodities are not assets. They are usable products that we put into our products."

He said treating commodities as capital has driven the market price for products like corn to record highs.

"That’s the primary reason you’re facing what you’re facing today," he said, referring to record feed prices. A major Northeast Georgia poultry processor, Fieldale Farms Corp. of Baldwin, said its feed prices had increased by $2 million per week.

Perdue said he discussed the situation this week with U.S. Sen. Joseph Lieberman, I-Conn., who was traveling with presidential candidate John McCain. The Connecticut senator held a hearing earlier this year on Capitol Hill where a number of experts testified that financial speculation by institutional investors and hedge funds in the commodity markets is the primary reason food and oil costs have risen to unprecedented levels.

He said he will seek the support of the Georgia delegation in enforcing federal laws already on the books. "I’m not talking about more regulation on business; I’m talking about enforcing the speculative position limits that have been there since 1936 in order to keep people from moving the market to unrealistic expectations," Perdue said.

"The ultimate balance is the ability to deliver against these futures contracts," he said. "If somebody wants to bid the price up $3 more than it needs to be, then we ought to have the ability to ship it to Chicago and let them eat it."

Perdue told the poultry group that this was the first time he has spoken publicly about the issue, but plans to add his voice to a national call for action.

Roger Tutterow, a Mercer University economist, said speculation can drive up the market costs of commodities.

"One of the complicating factors in the run-up of some of the commodity prices, including oil and foodstuffs, is that a lot of positions are taken by people that are doing so for speculative reasons," Tutterow said. "They’re able to take on significant leverage in some cases. It’s not unrealistic to think that speculators are inducing some volatility in commodity prices."

Abit Massey, president of the Georgia Poultry Federation, said the governor’s decision to seek action regarding commodity markets was well received.

The industry has been plagued by increased costs of feed, as well as higher prices for fuel for large truck fleets.



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