I once read a book about tulip bulbs in Holland. A few hundred years ago, when tulips first became the symbol of the Dutch nation and new varieties and colours were at a premuim, there was a run on the price of bulbs. Small quantities of special types became more and more valuable, finally changing hands at exorbitant prices equivalent to the value of a big house. Tulips became currency and the hysteria spread - until, of course, the speculators came to their senses and the market collapsed.
I was reminded of this when I read the weekly market report received today from the farmer owned merchant, Grainfarmers. "Another amazing week in the wheat markets around the world -or should we say the USA," the report began. And it went on to describe how last week, in Minneapolis, after daily exchange limits were removed, the price of wheat went up more than £100/metric tonne in one day. It came down by a bigger sum by the end of the week but not before one US merchant, who employed a rougue trader, had lost $140m.
At the same time, here in the UK, prices moved up by a more modest £12/mt. Even so it seems to me we are witnessing a certain amount of madness in grain markets that is sentiment (ie panic) led rather than by any real evidence of a huge potential shortfall to justify such volatility.
If you got in with a secure sale on the day, fully back to back with reliable traders, good luck to you. But for most people daily price movements on a scale previously only seen through an entire year and who did not catch the moment, such changes are unsettling and dangerous. Because we can so easily come to believe this activity on financial markets is the real world whereas for the majority it is fantasy - like those tulip bulbs.