Millions go unfed while speculators get fat

WE'VE come a long way since the famines in India yet poverty and rising food prices are still
very much with us. Estimates say there are a billion people in the world living on less than US$1
a day, and perhaps as many again living on the verge of starvation.

Arguably food ranks above their desire for free speech, open elections or the freedom to
associate. It was hunger and food prices that brought the demonstrators out in Egypt and Tunisia
not the right to vote though this may be part of the enduring mantra of the glib. Proper
nourishment should be a human right next to healthcare, but the United States under Reagan tried
to bar them both from inclusion as basic human rights when the United Nations General
Assembly put it to a vote. Again the US under Bush in 2002 rejected "the right to food" as
absurd.

The main concern is the right to food can be a touchy issue in a world now beset by
deregulations and structural changes imposed by the International Monetary Fund whenever they
come in with nostrums in their bags. And then there are pundits too who say that food production
has always been tied to fundamentals -- bad weather and global warming and the price of oil and
acts of God. And then there's poor transportation and the average farmer's incompetence to boot.
And the Chinese are asking for beef and, finding their wealth a fun thing, are putting more meat
in their dim sums.

But hey, did you notice how the price of rice shot up in 2006 and then came plopping back to
earth again in 2008 and has remained steady ever since, as if nothing had happened? Now that
we've got talking about it, you'll also probably remember seeing other food items going scarce
and then reappearing in the shops as if by the wave of a magic wand as soon as price controls are
pushed aside. That's price manipulation you'll say, and speculating on the price of food -- or
agricultural derivatives, as Olivier de Schutter, the UN's Special Rapporteur on the Right to Food
(yes, there is such an office) puts it -- is as old as man. Why, even Aristotle in Politics wrote
about the wise philosopher Thales who cornered the market in olive oil and became very rich.

The truth is, you can get very fat by speculating on food, and that's what's causing concern now
that sub-primes have bombed and other forms of gung-ho derivatives have brought red-blooded
bankers to their knees, wailing for bailouts from public wealth. So their next move is in food
futures and they have been doing just that as we have seen from the sharp rises in food prices in
2007 and 2008, when the world price of wheat went up by more than 80 per cent and the price of
maize nearly doubled.

These are gamblers who have no interest in the actual planting of crops and contribute no real
value to agriculture or land or the plight of farmers; their interest is merely in the cash they make
from the machinations in their daily work. There are still economists and apologists who argue
that market fundamentals are at work and that man has no control over climate. A fair enough
point, but blinkered. The UN Conference on Trade and Development (UNCTAD) report in 2009
has a better perspective when it concluded: "[P]art of the commodity price boom between 2002
and mid-2008, as well as the subsequent decline in commodity prices, were due to the
financialisation of commodity markets. Taken together, these findings support the view that
financial investors have accelerated and amplified price movements driven by fundamental
supply and demand factors, at least in some periods of time."

As the World Development Movement (WDM) points out in their Hunger Lottery report last
year: "As early as April 2006, Merrill Lynch estimated that speculation was causing commodity
prices to trade at 50 per cent higher than if they were based on fundamental supply and demand
alone."

Investment banker Goldman Sachs has dismissed the WDM report as "horribly misinformed", an
accusation quickly riposted by WDM with the reminder that the figures they used came from
Goldman Sachs' own annual report.

The fact is, says the WDM, since the financial crisis, "hedge funds, investment bankers and
pension funds have poured over US$200 billion into food markets... betting on the rising price of
food".

"The number of derivative contracts in commodities increased by more than 500 per cent
between 2002 and mid 2008," they point out.

Intense lobbying has, since 2000, rolled back commodity trading controls meant to stop
speculative activity in the depression years in the US, enough to alarm 18 economists in the US
who wrote to warn Congress that "deregulation... encouraged hyper-speculative activities by
market players who had no interest in the physical commodities being traded".

And we all know what the results will be, and as the speculators roll their merry die and make
their gains and losses, think of the two billion who will go to bed unfed tonight.

Read more: Millions go unfed while speculators get fat

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