Four Faces of Speculation

The Farmer, the Baker, the Banker and the Hedge Fund Manager

As part of its look at the impact of speculators on global food and energy prices, SPIEGEL visited a farmer, an investment banker, a bakery entrepreneur and a hedge fund manager -- all professionals for whom speculation is a part of their daily business.

Farmers have long used futures are a way of hedging their bets against adverse weather conditions that can negatively affect crops. Bakers also use them to guarantee prices on the summer's grains before they are harvested. But there are two new faces in the business of speculation, which stems back from the days of the Old Testament. Small investors represented by banks and hedge funds have also jumped into the business -- a move that could potentially bring turmoild to food prices and markets. SPIEGEL met up with four traditional and contemporary professionals for whom speculation is part of their daily business.

The Farmer

Next month Hermann Terjung will officially take over his father’s farm in the western German city of Mülheim an der Ruhr. For the first time in four generations, a university graduate will be running the family business.

Terjung, 35, studied agriculture for seven semesters at the University of Paderborn. Now he wants to run his father’s farm more efficiently, using instruments that will increase profits.

In the past it was common to sell the entire summer’s harvest to a cooperative in the spring, at predetermined amounts and prices. This year, however, Terjung hasn’t signed a contract. The market price of grain is at a rare high, and he doesn’t want to be pinned down to one price so early in the year.

"Farmers who don't have supply contracts at the moment are now calling the shots," says Terjung. He plants 30 hectares (74 acres) of wheat, 25 hectares of barley, 15 hectares of rapeseed and seven hectares are reserved for potatoes. Just over two years ago, the Terjungs received on average €8.80 ($13.60) for 100 kilograms (220 pounds) of wheat. Last year it was about €15. Now the price of wheat is pushing the €20 mark.

After the harvest at the end of July, Terjung will sell just half of his crop to the cooperative at the current price. He'll store the other 50 percent until at least October, in silos built especially for this purpose. "Maybe prices will rise further," says Terjung. "It’s my risk. Agriculture is becoming increasingly speculative, even though a farmer by nature is anything but a speculator."