Oreos, Vomitoxin, and the Price of Wheat

But that is a false dichotomy. There are lots of farms in the US that grow their products naturally and without processing. They don't have increased risk of diseases (probably just the opposite since they aren't keeping their animals packed inside enclosed spaces and pumping them full of antibiotics), and the food tastes amazing.

I was raised in communist Europe too (and still live there, fortunately communism died:)). The food was bad, but for different reasons than now. Now food is very cheap compared to the food during communism, even in absolute terms, and people got more wealthy as well. And food is cheap mainly because there's a price/quality trade-off that just wasn't there. You can get great food now, and it's not much more expansive than food during communism was, but nobody buys it, because you can also buy stuff that seems OK and costs 70% less.

Back then there was "a butter", or "a pig meat" and you bought it. No point in having 2 different butters, right? Same with most of the stuff. If particular factory happened to make a good butter - you eat good butter, if you could buy it at all - that is.

And then there was secondary market - more important than the shops. People made stuff for themselves and family/friends, or for barter. And that food was good, because people did it for themselves mostly. Yes the Salmonella scare, etc - you cook your eggs and there's no problem. The salmonella scandals mostly happened with ice creams, and very few people did icecreams by itself. The cold cuts were a lot better than most of the stuff people buy today (99% meat, not 50% meat like the cheap wędliny of today). And no insane amount of various sugars in everything. Yes there was the problem of no vet control over the meat, but the only reason you could possibly want such control was a parasite, that was very rare anyway (and small farmers with 2 pigs and a cow each wasn't a good einvironment for the parasites to spread). Of course if you had vet friend you took the meat to him/her and gave him a few cold cuts for checking the meat for you. It was a whole secondary (hidden) economy.

Also now food is cheap so you can eat meat and sweets every day. And modern processed food is carefuly designed so you can eat it non-stop and want more. Natural food usually has some secondary tastes that make you stop after a while. The end result is - people eat much less healthy now, despite having more money, and better food available.

Of course widespread alcoholism and lack of modern drugs during communism nullified all the statistic benefits of better diet, except that there was no obesity.

Note that this story isn't really about vomitoxin, or about the permissible amounts of unpleasant stuff, at least not directly.

While that was the lead in, the actual story was about Kraft leveraging the markets, including products they can't use, to get a better price on the stuff they can use.

And FWIW, while the human limit for vomitoxin is 1ppm, it's 5ppm for pet food, and 10ppm for livestock feed.

Simple answer, buy the more expensive dog food. I spend roughly $50/50lb per bag of 0-grain feed that I give my dog. This lasts 2-3 months for a 40-50 lb dog.

Agreed, and I also don't see why it fooled anybody. Wouldn't it be common knowledge in the industry that the CBOT-traded wheat was unsuitable for use by Kraft in their products?

Initially thought it was going to be a rant about something icky sounding that's inevitable in food. Was pleasantly surprised.

"...praised its delicate aroma and relative lack of insect damaged kernels..."

It's quite the amazing tale of large-scale market play with some highly amusing imagery peppered around ;)

Speaking of insect damage (which is really tangential to the article's core subject, for anyone looking at the comments first), it reminds me of the ruckus a while back about the amount of crap (sometimes litteraly) in supermarket spices, of which the best article I can quickly find is NPR's: http://www.npr.org/blogs/thesalt/2013/10/31/242155387/a-spic...

Agreed. Matt Levine is always entertaining and frequently informative (especially the footnotes). I get the sense that he reads lots of courthouse docs.

And it wasn't close.

I am absolutely baffled by the story. What Kraft did doesn't seem morally wrong, doesn't raise red flags from my limited legal sense, and doesn't make intuitive sense from a market forces point of view. They found an arbitrage opportunity, made the futures market more efficient, produced cheaper oreo's and got in trouble with the law. Baffling.

No, it's not. This is.

Try this: http://ageconsearch.umn.edu/bitstream/15814/1/er040001.pdf and these: http://www.kisfutures.com/grains.html

You need to understand normal hedging of futures then this makes a lot more sense.

It mentions in the end in the footnotes you can mix together high vomitoxin and low vomitoxin wheat to produce the needed amount.

  I'm kidding. My dog is gluten-free. Also if you buy 
  the high-vomitoxin wheat you can blend it with 
  low-vomitoxin wheat until you get the perfect amount 
  of vomitoxin. Appetizing, no?

CBOT says wheat is deliverable if it contains up to 4ppm. That doesn't necessarily imply that all CBOT wheat == 4ppm vomitoxin. The answer though, would be to blend it with more expensive wheat, or to clean it with sorting machines, which they do anyway.

Edit: Here, sorting machines https://encrypted.google.com/search?tbm=isch&q=optical%20sor...

You can mix it with more pure flour. But I thought last was just reselling the 4ppm flour not using it themselves

Back when I was a kid, with some friends we played a game where we'd try and come up with nonsensical phrases like "but have you taken into account the quality of venezuelan poultry when predicting Marseille's weather??". If no-one could come up with a plausible chain of logic linking the things together they'd get a point.

In retrospect, this (and your comment), reminds me of Pinky's responses to Brain's "are you pondering what I'm pondering?"