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Comment by crazygringo | Hacker News Reader

> It also seems like they hiked prices too high

How is that even possible?

> It does kinda show how markets don't just magically hit an equilibrium price.

Generally, markets do "magically" hit that.

Can you explain why, at the moment demand dried up at the higher price, the suppliers didn't immediately drop the price to meet demand? That's generally how these things work.

Unless there's some kind of cartel operation at play here. In which that's to blame, not the market.

Can you provide any links with greater detail?

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I was wondering how it’s possible too. The article mentions this exchange:

https://www.ice.com/products/15/Coffee-C-Futures

My take:

Futures traders decided the price would go up 70%, and were very wrong. This led to the standard “C” contract (set by the ICE exchange) price being too high, tanking demand. If you want to participate in the futures market, you need to have a license you get from the exchange.

I’m sure some producers will try to bypass the exchange market that manages all that, but, ultimately, someone will have to lose a bunch of money. It’ll either be the traders (futures contracts end up being worthless) or the producers (coffee ends up rotting or being refused by the silo).

The article suggests it’s the latter, which makes me wonder how powerful the exchange is, and what happens if you just start freighting bags of coffee around.

So why is an exchange setting a price at all?

That's not how exchanges generally operate. They generally simply match supply and demand.

An exchange setting prices is the literal opposite of a free marketplace. Is this more of a cartel, like OPEC?

I’m not an expert on agricultural commodity exchanges, but at least some (like the Chicago board of trade) look like a cartel from the outside. The cartel controls distribution, and squeezes the producers and the consumers.

If that’s happening here, that’d explain how we can be in a situation where the (1) retailers want to buy coffee, but can’t afford the newly hiked price, (2) the producers are sitting on unsold inventory that they can’t discount, and, simultaneously (3) there’s a glut of distribution capacity and things like silos are sitting empty and going bankrupt.

Whenever someone says the market doesn't work it's just because it's not doing what they think it should, as if there's some pre-ordained magical prices.

A market that allows gamblers to cause resources to rot rather than lose money on their own bad bets is working exactly as a market should?

Seems to me the bigger magical leap here is in the observer who considers this to be either desirable or necessary.

If the people that wanted to buy bought, and the people that wanted to sell sold, and there was no fraud, yes.

This is why no one should take capitalist true believers seriously.

It’s not an efficient (let alone moral) distribution system if one of its outcomes is spiraling prices that are irreflective of genuine market demand.

The whole problem highlighted here is that the people who want to sell cannot sell because the buyers don’t want to eat their consequences and man up to the loss on their gambling.

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