New evidence that speculation on food by hedge funds, pension funds and investment banks is fuelling the rise of bread and other basic foods has been released by anti-poverty campaigners on World Food Day, October 16, 2010.
The World Development Movement has calculated that over the summer, financial speculators in Chicago alone bought up corn futures contracts equivalent to nearly 1.7 billion bushels  – more than the annual consumption of Brazil, a country of some 260million people and the world’s third largest consumer of corn.
The figure for wheat over the same period was 241 million bushels , equivalent to seven times the amount consumed by Kenya, or half the UK’s total annual wheat harvest.
Between April and September 2010, world prices for wheat rose by over 40 per cent, while corn has risen by over 30 per cent. The campaigners say that these prices rises, which are the highest since the food crisis that gripped the world in 2008, are contributing to higher inflation in the UK for basics foodstuffs such as bead and pasta in the UK, as well causing hunger in developing countries.
Although drought has affected the production of grains in Russia, the US and Ukraine, the campaigners say that the price rises can not simply be put down to decreased supply because predicted crop yields and reserve stocks are more than adequate to meet global demand.
Dr Julian Oram, head of policy at the World Development Movement said:
“These figures categorically demonstrate that recent price spikes have been fuelled by opportunistic speculators snapping up food derivatives contracts to make a quick buck. This kind of activity is bad news for ordinary people in the UK, whose weekly shop is becoming more expensive during already tight times, and for poor consumers in developing countries, where it's contributing to hunger and political instability.
A new financial reform law was passed in the USA this summer which will help to prevent excessive speculation on food commodity derivatives. But in the UK there are concerns that the government could try to block similar reforms proposed in Europe, because of strong resistance by the banking industry, which has been lobbying hard against regulation.
Dr Oram continued:
“Declaring a crack down on predatory speculation by banks and hedge funds would be the best way in which the UK and other governments could mark World Food Day this year.
The World Development Movement’s analysis has been backed up by industry experts. Long time hedge fund manager Mike Masters said:
“Because there is already much more capital available in the world than hard commodities, speculators can increase the price of consumable commodities, like foodstuffs or energy, much higher than traditional consumers and producers can react. When derivative markets are linked to commodity markets, this nearly unlimited capital from the financial sector can cause excessive price volatility.”
Recently, researchers from the World Development Movement went to Kenya to talk to people affected by the food crisis in 2008, they met Judith Atieno Odhiambo who lives in Kibera, Kenya, Judith said:
“I couldn’t afford to eat for three days. We only had water. I got TB before the food crisis, but it got much worse because I was hungry, so I had to stop working. My children were hungry and crying because there was no food."
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