There's nothing like scarcity and supply disruptions to fuel violent price spikes. And there's nothing like the basic human needs for food and water to light that fuse. Today's world food supplies run on razor-thin inventories. While the food riots of 2008 have all but disappeared from our short-term memories, the threat of them returning grows stronger with every passing day. According to the World Bank, food prices increased 83% between February 2005 and February 2008. In April 2008, when the United Nation's World Food Programme warned that a "silent tsunami" of hunger was sweeping the globe because of soaring food prices, it was more than just a clever sound bite tossed off by a bureaucrat: It ...

After earning hefty profits on its commodities trading for nearly 18 years, heavyweight trader Goldman Sachs Group Inc. (NYSE: GS) now finds itself on the hot seat, defending this crucial source of revenue. And while that may not be good for Goldman, it’s also bad for investors.  Let me explain…

It all started back in 1991, when J. Aron & Co., Goldman’s commodities-trading division, recommended that a large institutional client invest about $100 million in commodities.  The vehicle “du-jour” was Goldman’s own investment vehicle, the Goldman Sachs Commodity Index (now the S&P GSCI Commodity Index).

The GSCI is a 24-commodity dollar-weighted index, comprised of 70% energy (oil and natural gas), 8% industrial metals (aluminum, copper, lead, nickel and zinc), 3% precious metals (gold and silver), 14% agriculture (wheat, corn, soybeans, cotton, sugar, coffee and cocoa) and 4% livestock (cattle and hogs).

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Tighter credit for farmers could worsen a global food crisis as smaller crop sizes cause prices to soar. Many farmers have traditionally bought pre-season supplies such as seeds and fertilizer on credit and then paid off the debt with the proceeds from the year’s harvest. But with a growing number of farmers unable to obtain the credit they need, crop yields will suffer.

Global wheat production will likely be 4.4% less next year, Dan Basse, president of AgResource Co. in Chicago, told Bloomberg News. Basse believes the world’s corn and soybean crops will also see declines.

“The credit situation is worrying even the biggest and best farmers,” Brian Willot, a former University of Missouri commodity analyst who now grows soybeans in Brazil, told Bloomberg. “For the financially weak, credit has dried up completely. For the strong, credit has been delayed and interest rates are

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Tighter credit for farmers could worsen a global food crisis as smaller crop sizes cause prices to soar. Many farmers have traditionally bought pre-season supplies such as seeds and fertilizer on credit and then paid off the debt with the proceeds from the year’s harvest. But with a growing number of farmers unable to obtain the credit they need, crop yields will suffer. Global wheat production will likely be 4.4% less next year, Dan Basse, president of AgResource Co. in Chicago, told Bloomberg News. Basse believes the world’s corn and soybean crops will also see declines. “The credit situation is worrying even the biggest and best farmers,” Brian Willot, a former University of Missouri commodity analyst who now grows soybeans in Brazil, told Bloomberg. “For the financially weak, credit has dried up completely. For the strong, credit has been delayed and ...