The Snowball Effect of Agricultural Subsidies in America

The folks at Reason TV recently put together an excellent 8-minute video about agricultural subsidies in America, from their roots in the Great Depression, to their effects today on commodity prices and economies around the world.

As a commodities trader and/or investor, it's extremely important for you to be familiar with these subsidies.

I should warn that you may get a little riled up and enraged in exploring the absurdity of these subsidies, and the collective ignorance of the politicians who allow them to continue.  

Just be sure to regather your personal Zen before trading reopens on Monday. While agricultural subsidies are obviously complete bullshit, their existence, and more importantly, future changes to them, can have drastic effects on commodity prices, and hence our trading. So it's important that we anticipate their effects with a clear head.

For example, if there was a real chance that cotton subsidies could be reduced or eliminated in the US, you can believe that the futures markets would quickly take this fact into account, and you'd see cotton futures prices start to really take off.

And if you want some cocktail party fodder for riling up any liberals in your life - higher cotton prices would indeed help many poor Africa nations, whose farmers are not cost competitive today because they don't have a government behind them printing money and subsidizing their farming.  So there you go - we can profit by speculating on cotton, and also help the poor kids in Africa.  

Yes we can!