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article imageGambling banks, hedge and pension funds spike global food prices

By Lesley Lanir     Sep 3, 2012 in Business
The World Development Movement blames banks, hedge and pension funds for betting and gambling on food commodities and forcing the price of basic food items to soar causing global hunger and poverty to increase.
The World Development Movement blames the unprecedented 10% rise in staples on the banks, hedge funds and pension funds that bet on food prices in financial markets, causing price highs and lows in staple foods such as wheat, maize and soy granting them huge profits but at the same time causing hunger and poverty for millions around the world. They state as an example that In the last six months of 2010 alone, more than 44 million people were driven into extreme poverty as a result of rising food prices.
The World Development Movement quote Michel Barnier, European commissioner for the internal market as saying.
Speculation in basic foodstuffs is a scandal when there are a billion starving people in the world. We must ensure markets contribute to sustainable growth. I am fighting for a fairer world and I want Europe to take the lead on that.
World Bank records show that worldwide food prices reached an all-time high in July. Droughts and high temperatures caused disappointing US and Eastern European harvests forcing the average worldwide cost of basic food items to spike 10 per cent in a month. The news report states that "from June to July, maize and wheat rose by 25 percent each and soybeans by 17 percent".
Although, clearly, adverse weather conditions do affect harvests and food prices as do geopolitics, The World Development Movement report, July 2010, The Great Hunger Lottery - How banking speculation causes food crises presents the argument of how financial speculation and derivatives trading on food commodities, although lucrative for some, affect global food prices by causing price spiking which leads to unaffordable food prices for low-income families especially in developing countries relying on food imports.
As stated, the report's basic message is:
Allowing gambling on hunger in financial markets is dangerous, immoral and indefensible. And it needs to be stopped before any more people suffer to satisfy the greed of the banks.
In a more succinct message Stop Gambling on Hunger says: Wall Street is gambling on the world’s food supply.
One bank the WDM refer to in particular is the UK bank Barclays who they estimate make around £340m yearly from "food speculative activities".
A later report from the WDM Broken markets - How financial market regulation can help prevent another global food crisis September 2011 argues and presents:
• How trading reforms are urgently required in order to stop a global food price crisis driving millions more into hunger and poverty.
• How financial speculation has boomed, turning commodity derivatives into just another asset class for investors.
• How the latter distorts and destabilises the proper functioning of agricultural markets.
• How changes in the financial markets affect the price of food, and the negative impact this has on the world’s poorest people.
For more information on this subject:
Word Bank Food Price Watch
Stop Gambling on Hunger
How institutional investors are driving up food and energy prices
More about The World Development Movement, Global food prices, Commodities, Barclays Bank, World hunger
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