Barclays: profiting from hunger
Barclays is the UK’s biggest player in food speculation. Despite closing parts of its agricultural commodity trading business, Barclays continues to play a role driving up food prices and leaving millions facing hunger and malnutrition.
On 12 February 2013, after three years of public campaigning by WDM that called on the bank to stop betting on hunger, Barclays announced it would no longer trade in agricultural commodities “for speculative purposes”, saying that the practice was “not compatible with our purpose”. This was a campaign success worth celebrating.
However, despite ending its controversial speculative deals with hedge funds, Barclays continues to offer opportunities for others to speculate on food. It remains the biggest UK high street player in food speculation and will retain a role as a broker for pension funds and large traders such as Cargill and Glencore to bet on the price of food.
We estimate that Barclays made up to £278 million in food speculation in 2012.
Top UK player in food speculation
- Although Barclays has ceased some agricultural commodity trading, it still has an established reputation in the UK commodity market. Barclays is known in the financial industry for developing products which facilitate other financial players like pension funds to bet on food prices. In this way it plays a key role in opening the door for others to flood these markets with speculative money, driving up prices.
- Barclays is still a leading player in speculation on other commodities, including oil which can drive up oil prices. Since oil is a key input in agricultural production, higher oil prices means higher costs of production and therefore higher food prices.
Banks can’t be trusted
Barclays has admitted that they have reduced their involvement in food speculation because it was believed to be a potential cause of food price inflation.
Other investment banks across Europe are making similar admissions. This strengthens the hand of those calling for regulation.
However, such commitments from banks can be short lived. In 2012, Major Germany food speculator Deutsche Bank said it would not release new financial products enabling food speculation. However, in January 2013 it announced that it would be returning to the market, claiming that there was little evidence to support the idea that speculation affected food prices. This was despite its own research admitting a link between speculation and price volatility.
This example illustrates the need for firm regulation in Europe. With so many people vulnerable to world food price spikes, it is clear that individual banks cannot be trusted to stop speculating on their own.