Whenever the price of some commodity rises above a certain level (and that commodity is usually oil) we inevitably start hearing the ill-informed complaint about the “greedy speculators” who are profiting from everyone else’s misery. Then we mount our defense, explain why those complaints are foolish, and wait for the price to fall and the complaints to go away. Eventually prices rise again, and the foolish complaining starts up again. To be honest, it’s a somewhat tiring pattern.

But we realize that that it’s easy for us to fall into the pattern, too – we tend to mount our defense of the futures industry only when it comes under fire. But there are plenty of opportunities to point out when the futures industry is providing a valuable service to the broader economy – as we were recently reminded by an article in the CME Group’s magazine Open Markets:

But when risk is effectively managed in ag markets, it’s not just the individual or the corporation that thrives. To Secretary Vilsack’s point, a nation’s economic health is helped considerably by the ag industry’s ability to keep itself afloat in even the most turbulent times. And the last year certainly was turbulent for many of our nation’s food producers, with more than 80 percent of the nation’s farmland and half of its counties declared drought disaster areas. The USDA projects that U.S. food costs will rise somewhere between 3-4 percent this year as a result.

Last summer’s devastating drought caused huge swings in grain futures – corn and wheat both rocketed upward more than 50% in less than two months. Over the last 6 months, prices have fallen to erase most of those gains. But it’s a testament to the benefits of the futures trade that the cost of groceries didn’t see a similar massive spike followed by a collapse – in large part because thanks to speculators absorbing the swings to both the upside and the downside.

Granted, they aren’t in it for charity – some CTAs benefitted a great deal from the price swings, like Global Ag, which made more than 17% in a single month last summer (Disclaimer: past performance is not necessarily indicative of future results). And there were certainly some who lost money, too. Further, as Open Markets points out, some of those prices swings will be reflected in your grocery bill… but it will be far from the full impact.

A liquid, transparent, and regulated futures trade helps producers, consumers, and forms the basis for our favorite investment vehicle. The complaints surface whenever prices rise, but the benefits are always there, quietly keeping huge sections of the economy – agriculture and otherwise – running smoothly.