Two articles discuss food speculation as Wall Street continues to starve millions. “Get ready for a rocky year. From now on, rising prices, powerful storms, severe droughts and floods, and other unexpected events are likely to play havoc with the fabric of global society, producing chaos and political unrest. Start with a simple fact: the prices of basic food staples are already approaching or exceeding their 2008 peaks, that year when deadly riots erupted in dozens of countries around the world,” writes Tom Dispatch.
By John Vidal
Just under three years ago, people in the village of Gumbi in western Malawi went unexpectedly hungry. Not like Europeans do if they miss a meal or two, but that deep, gnawing hunger that prevents sleep and dulls the senses when there has been no food for weeks.
Oddly, there had been no drought, the usual cause of malnutrition and hunger in southern Africa, and there was plenty of food in the markets. For no obvious reason the price of staple foods such as maize and rice nearly doubled in a few months. Unusually, too, there was no evidence that the local merchants were hoarding food. It was the same story in 100 other developing countries. There were food riots in more than 20 countries and governments had to ban food exports and subsidise staples heavily.
The explanation offered by the UN and food experts was that a “perfect storm” of natural and human factors had combined to hyper-inflate prices. US farmers, UN agencies said, had taken millions of acres of land out of production to grow biofuels for vehicles, oil and fertiliser prices had risen steeply, the Chinese were shifting to meat-eating from a vegetarian diet, and climate-change linked droughts were affecting major crop-growing areas. The UN said that an extra 75m people became malnourished because of the price rises.
But a new theory is emerging among traders and economists. The same banks, hedge funds and financiers whose speculation on the global money markets caused the sub-prime mortgage crisis are thought to be causing food prices to yo-yo and inflate. The charge against them is that by taking advantage of the deregulation of global commodity markets they are making billions from speculating on food and causing misery around the world.
As food prices soar again to beyond 2008 levels, it becomes clear that everyone is now being affected. Food prices are now rising by up to 10% a year in Britain and Europe. What is more, says the UN, prices can be expected to rise at least 40% in the next decade.
There has always been modest, even welcome, speculation in food prices and it traditionally worked like this. Farmer X protected himself against climatic or other risks by “hedging”, or agreeing to sell his crop in advance of the harvest to Trader Y. This guaranteed him a price, and allowed him to plan ahead and invest further, and it allowed Trader Y to profit, too. In a bad year, Farmer X got a good return but in a good year Trader Y did better.
When this process of “hedging” was tightly regulated, it worked well enough. The price of real food on the real world market was still set by the real forces of supply and demand.
But all that changed in the mid-1990s. Then, following heavy lobbying by banks, hedge funds and free market politicians in the US and Britain, the regulations on commodity markets were steadily abolished. Contracts to buy and sell foods were turned into “derivatives” that could be bought and sold among traders who had nothing to do with agriculture. In effect a new, unreal market in “food speculation” was born. Cocoa, fruit juices, sugar, staples, meat and coffee are all now global commodities, along with oil, gold and metals. Then in 2006 came the US sub-prime disaster and banks and traders stampeded to move billions of dollars in pension funds and equities into safe commodities, and especially foods.
Read full post at The Guardian
By Michael T. Klare
Get ready for a rocky year. From now on, rising prices, powerful storms, severe droughts and floods, and other unexpected events are likely to play havoc with the fabric of global society, producing chaos and political unrest. Start with a simple fact: the prices of basic food staples are already approaching or exceeding their 2008 peaks, that year when deadly riots erupted in dozens of countries around the world.
It’s not surprising then that food and energy experts are beginning to warn that 2011 could be the year of living dangerously — and so could 2012, 2013, and on into the future. Add to the soaring cost of the grains that keep so many impoverished people alive a comparable rise in oil prices — again nearing levels not seen since the peak months of 2008 — and you can already hear the first rumblings about the tenuous economic recovery being in danger of imminent collapse. Think of those rising energy prices as adding further fuel to global discontent.
Already, combined with staggering levels of youth unemployment and a deep mistrust of autocratic, repressive governments, food prices have sparked riots in Algeria and mass protests in Tunisia that, to the surprise of the world, ousted long-time dictator President Zine al-Abidine Ben Ali and his corrupt extended family. And many of the social stresses evident in those two countries are present across the Middle East and elsewhere. No one can predict where the next explosion will occur, but with food prices still climbing and other economic pressures mounting, more upheavals appear inevitable. These may be the first resource revolts to catch our attention, but they won’t be the last.
Read more at TomDispatch