Financial investors betting on the price of food are dangerously driving up prices, threatening millions of impoverished people in food-importing countries who will go hungry, critics warn.
But the issue of food speculation by banks, hedge and pension funds is a controversial one, and many observers say there is no evidence that gambling on food causes price increases and volatility.
Opponents are demanding that G-20 leaders take urgent action to halt agriculture commodity speculation, after summer drought ravaged US corn crops, and lower-than-expected wheat yields in Russia, Ukraine and Kazakhstan.
Activists say while nothing can be done about the effects of drought devastation on prices, the trade of agricultural financial products can – and must – be immediately halted.
About one billion people around the globe already go hungry. It is predicted the number will jump by 53 million by the end of 2012, according to the UN World Food Programme.
Countries in the Middle East and north and sub-Saharan Africa are most vulnerable to the latest global food-price spike, the third in five years. Some analysts are warning food riots – similar to those that erupted in 2008 and 2010 – could be on the horizon.
In just one year, maize prices have jumped by 174 per cent in Malawi and 129 per cent in Mozambique. Wheat prices have surged 52 per cent in Sudan since July 2011, according to the World Bank.
Financial speculation is “among the various drivers of increased price levels and volatility”, according to a recent release by three UN agencies.
G-20 officials are discussing the issue and could call an emergency meeting to try to head off a potential global food crisis.
But some are sceptical any real action will be taken. If an emergency meeting is called, expect “nothing from the G-20 on financial speculation”, Simon Evenett, professor of international trade at the University of St Gallen, Switzerland, told Al Jazeera.
France’s Agriculture and Food Minister Stephane Le Foll has blamed skyrocketing prices partly on excessive food speculation. He urged taxation of financial transactions and “position limits” – which cap the amount speculators are allowed to invest.
“There have been transfers, speculators leaving other markets to come to food markets. We need to stop this,” Le Foll recently told French television.
While some point a finger directly at agriculture speculation as playing a significant role in food-price spikes, others deny any such link.
“At most, financial speculation has been a minor aggravating factor,” Evenett said.
Peter Schiff, an economist and CEO of Euro Pacific Capital, said agricultural trading does not affect prices, and halting the practice could compound the problem.
“If you took all the speculators out of the market, the prices might even be higher,” Schiff told Al Jazeera’s Inside Story.
Shenggen Fan, director general of the International Food Policy Research Institute, said “the evidence so far is inconclusive”, when asked if speculation was driving up prices.
But others contend with ample food supplies over the past few years, the volatility and price surges cannot be explained by supply and demand alone. Read the rest of this entry »