Food speculation

Along with its annual results yesterday, Barclays revealed its new strategic plan to haul the bank from the pits of public disdain. As part of its new direction, Barclays – the UK’s leading commodities speculator - announced it is pulling out of food speculation. After three years of public campaigning and calling on the bank to stop betting on hunger, this is very exciting news!

Barclays had a massive PR job on its hands to mend its toxic reputation, earned from the Libor rate scam, the PPI mis-selling scandal and the interest-rate swaps rip-off of small businesses. It could have left its agricultural commodities division untouched. But it couldn't afford to ignore commodities.

Why? Well with three years of protests outside its local branches, protests outside and inside its AGM, media stories exposing Barclays’ leading...

A new campaign If… on hunger and food security has launched, run by a group of development organisations. WDM has decided not to join this campaign.

WDM campaigns to tackle the root causes of poverty and injustice. Our current campaign on food goes to the heart of one of the problems with our food system: the power of the financial sector and the role of commodity speculation in causing food price spikes. We are also actively engaging with and contributing to a long term vision and solution – food sovereignty – guided by our allies in the global south.

As a small organisation, we do not have any additional campaign capacity to contribute to a food campaign with a different focus. The If... campaign is concerned with food security - ensuring people have enough to eat. However it will not be challenging the power and impact of the financial system on food prices, nor is it grounded in the principles of food sovereignty. WDM believes that these principles, which are about power, control and rights, must underpin future changes to our food systems.

We welcome many of the campaign demands in the If......

Dan Iles takes a look at the latest World Bank food price figures.

The recent World Bank’s quarterly Food Price Watch, released this November, yet again paints a concerning picture in terms of continued high food prices across the world. Worryingly, the World Bank recognises a new norm of high and volatile food prices but still refuses to mention any reference to food speculation and the actions of financial institutions. 

Key points:

• International food prices remain close to all-time highs. Food prices in October are still 7% higher than a year ago, and the prices of grains remain particularly high. Prices of grains are 12% above their levels 12 months ago and very close to the all-time high observed in 2008
• The national price of wheat increased by 27% in Tajikstan between July and September
• Countries reliant of US exports of maize are still very vulnerable to price fluctuations. The price of maize in Haiti and Honduras went up by 28% and 19% respectively between July and September 
• The World Bank...

Barclays Bank has hinted it is considering pulling out of food speculation due to ‘reputational risk’. The World Development Movement is calling on the bank to commit to ending its involvement in commodity markets, and is urging George Osborne to back tough rules to curb speculation at a European level.

Rich Ricci, chief executive of Barclays’ corporate and investment arm, told the UK's Parliamentary Commission on Banking Standards yesterday, “If I decided to stop trading soft agricultural products it is not driven by regulation. It is because it doesn’t sit socially well with the large constituent of our customers”, according to the FT newspaper.

Barclays is the biggest UK player in food commodity markets, making up to an estimated £500 million from speculating on food prices in 2010 and 2011.

The World Development Movement’s director Deborah Doane said today:

Barclays appears to be relying on the police force of public opinion to tell it that speculating on food prices is wrong, rather than acknowledging its own moral responsibility. This is precisely why it is essential that strong regulation is introduced. Food speculation has devastating consequences, and George Osborne and...

On Friday I was privileged to join five well-informed WDM supporters from the Tunbridge Wells constituency for an important meeting. The group were going to see their MP, Greg Clark, who also happens to be financial secretary to the treasury - the minister with responsibility for regulating food speculation.

With just two weeks to go until finance ministers from the 27 EU member states discuss their position on new regulation to curb financial speculation on food and other commodities, they were intent on making sure he heard that the public is angry about the way banks are allowed to gamble on food prices, and want to see the UK back tough rules to limit their involvement in the markets.

The constituents were given a fair if short hearing, and had chance to hand over a copy of our photo petition, containing messages from hundreds of people who want to see the UK government support action on food speculation.

But we ended the meeting with work still to do. Not only did he leave us with...

At last! A meeting last Friday with an MEP, an influential one, about the European parliament's moves to tighten their grip on food speculation (as well as other commodities trading).

Thanks to a robust exchange of letters in the Guardian recently, WDM gained this window for us to put what we consider must be non-negotiable expectations of the process to Sharon Bowles, Lib Dem MEP and chair of the Economic and Monetary Affairs (ECON) committee.

WDM local group members were joined on Friday by WDM’s director Deborah Doane for meeting with Liberal Democrat MEP Sharon Bowles

It was very short notice but four local group members were able to make it, along with WDM’s director Deborah Doane and campaigner Christine Haigh. Ms Bowles gave us an hour of her time, did a lot of explaining but also agreed to hold out on certain key issues. One can never be sure until the votes are in, but my impression was that she wants to curb the unethical activities in the markets and...

The World Development Movement’s director Deborah Doane has responded to predictions that poor harvests in the UK will lead to rising food prices, warning that financial speculation could send prices soaring even higher. 

Deborah Doane said today: "Food prices are rising steeply due to poor harvests, and if the 2008 food price crisis is anything to go by, we may see financial speculation driving prices up even further in the coming months.

"In the absence of effective regulation of the finance sector, banks and hedge funds are effectively gambling on food prices.

"Here in the UK, the poorest people are already cutting down on fresh fruit and vegetables because they can’t afford them. In developing countries, where people spend up to 90 per cent of their incomes on food, price spikes force millions of people to go hungry.

"Banks like Barclays, which made an estimated £500 million on food prices in 2010 and 2011, are taking advantage of changing prices for their own gain. Unless we stop this by regulating the finance markets, speculation will turn the current price rises into an even greater crisis for people both in the UK and worldwide."

If there’s such a thing as time travel, can you also experience class and culture travel?  If so I think I experienced it today…

This morning I travelled to the Conservative Party Conference with activists from the World Development Movement.  We were taking part in a protest calling on George Osborne to support regulation to stop bankers betting on food prices. Food speculation has contributed to food price spikes in recent years.

I left home (Croydon) at 5.am. Initially the dark streets were deserted, occasionally punctuated by the fluorescent strips of the street cleaners. Gradually the bus stops became more populated with people in normal clothes, many (I’m assuming) cleaners, going to clean the office blocks before the arrival of the suited city folk that I saw towards the end of my journey to Euston.  The delegates that WDM was leafleting as they entered the Conservative Party Conference completed the spectrum of the different social groups that wittingly or unwittingly, perform their roles in the theatrical production which is our global economic structure. 

...

On the eve of the Tory party conference, photos of people holding messages asking George Osborne to regulate food speculation will be projected onto the wall of the Tory party conference.

On Saturday night, WDM's ‘photo petition’ will be projected onto Birminghan's International Convention Centre before moving it to a series of locations around the venue in Birmingham.

The World Development Movement is calling on the Chancellor to back European regulation to curb financial speculation in commodity markets. Speculation is fuelling price volatility and pushing food prices beyond the reach of millions of people in developing countries. 

Early morning in Brussels and a group of us - representing different organisations from across Europe – unloaded a truck filled with 925 pots and pans representing 925 million people suffering from hunger in the world today.

Each pan has a message written on it from EU citizens calling for an end to excessive speculation on food.

Together we laid out all the pans to spell out the words 'stop food speculation.' 

The World Bank's latest Food Price Watch reveals stark rises in food prices. Among the most striking statistics are:

• In July, world food prices jumped 10 per cent.
• Maize prices hit a record level after rising 25 per cent in that month.
• The price of maize in Mozambique, where people spend over half of their income on food, more than doubled between April and July.
• South Africans faced a 27 per cent hike in wheat prices during those three months.
• Over the last year, maize prices soared by 174 per cent in Malawi.

The Bank identifies drought as the key driver of the price rises but the World Development Movement is warning that financial speculation is exacerbating the scale of the spikes.

With much of the UK captivated by the Olympics last week, the anniversary of the riots that rocked cities across England last summer received little attention. While it is to be welcomed that violence on such a scale has not been seen in the UK again since, in recent weeks various commentators have suggested that more disorder is likely, as young people report continued anger and disenfranchisement.

It’s perhaps unsurprising, given the social and economic conditions inner city communities across the country are facing. As the Joseph Rowntree Foundation recently showed, five years on from the financial crisis, which was caused by the reckless behaviour of some of the richest people on the planet, it is the poor who are paying the heaviest price through cuts to publis services and benefits, while bankers continue to reward themselves with bonuses bigger than many people will be paid for a lifetime of hard work.

Recent analysis of findings of...

On Sunday, David Cameron will attempt to capitalise on the international presence in London for the Olympics to convene a ‘hunger summit’ – but campaigners have warned that the prime minister’s big business approach ‘risks entrenching the root causes of hunger’.

Political and business leaders and humanitarian groups at the summit are expected to announce a new target to reduce child malnutrition by the next Olympic Games in Rio in 2016. Former England football captain David Beckham has presented a letter to David Cameron urging him to tackle deprivation of essential nutrients early in a child’s life, which causes stunted growth.

The World Development Movement’s food campaigner Amy Horton said today:

“It’s great that David Cameron is using the Olympics to focus attention on the need to reverse the rising incidence of child malnutrition. But by promoting the role of big business in developing countries’ food markets, his approach risks entrenching the root causes of hunger.  

“Increasing the power of multinational companies over the world’s food is not going to improve child nutrition. Instead of corporate land grabs, we need local control over the resources on which food production depends. We need governments to be able to regulate international...

Partially as an ironic jab at preconceptions about people wearing certain types of clothing, and partially because all waterproof gear is black, I headed to Knutsford, the centre of George Osborne’s Tatton constituency, kitted out like a ninja, all in black.  Joining me was my faithful cameraman and co-flyerer Pablo.

We were armed only with blu-tack and 5000 flyers, asking the question ‘What can one person in Knutsford do about...

Last week we launched our exposé of the Financial Services Authority (FSA) – UK's supposedly 'independent' regulator of the financial services sector. We revealed how the FSA – funded by the banks and staffed by ex-bankers – acts as a lobby arm for the banks. It’s a classic case of 'regulatory capture' where an industry watchdog, created to act in the public interest, instead promotes the interests of the businesses it's supposed to regulate.

Its mis-directed influence undermines the public interest especially in the area of winning new rules to tackle food speculation. The FSA's influence has pervaded into every level of EU decision making on financial reform through staff secondment and the lobbying of MEPs. The City of London want to continue betting on food without any restrictions and FSA has been working behind the scenes to forward this agenda.

We wanted to expose the FSA but also hold it to account. So alongside our report we launched an online action to get people to email Adair Turner, chair of the FSA, and then to follow up with a phone call. The FSA is not widely known by the public and so is not used to direct public...

WDM research

The great hunger lottery - WDM report showing how speculation on food impacts the poor, and what can be done about it.

Broken markets - WDM report showing that financial speculation has a clear impact on rising food prices and countering arguments to the contrary.

Barclays PLC and agricultural commodity derivatives - Report showing that Barclays Capital makes up to £340 million per year from food speculation.

Back to fundamentals (report) - WDM report explaining why position limits are needed to protect consumers, producers and businesses from the impacts of food speculation.

Back to fundamentals (briefing) - Policy briefing explaining why position limits are needed to protect consumers, producers and...

After my brief encounter with Barclays, where I presented them with a “shame” award for their role in food speculation, I was eager to cause some more mischief, this time with the Financial Service Authority (FSA).

A recent WDM report has revealed that the FSA’s relationship with city banks like Barclays has been getting rather “cosy”, and the regulatory body has been lobbying for the very firms that it’s meant to be regulating. The FSA has also been offering its “impartial” advice to the UK government to help MPs decide on the important MiFID legislation, which includes controls on food speculation, but the FSA’s advice seems to be based solely on the demands of the city giants.

Because of this, I decided to give the FSA a quick call. Tucked away upstairs in the WDM office’s meeting room (to avoid the inevitable embarrassment of ranting down the phone in front of fellow WDM employees); I dialled in the general enquiries number and was met with a surprisingly jovial FSA receptionist. She seemed a little confused when I started talking about food speculation and quickly...

The UK’s financial regulator is compromised by corporate capture and is increasingly acting as a lobbying arm for the sector it is supposed to regulate, a new report reveals today.

The report, ‘Financial Services Authority: watchdog or lapdog?’, by the World Development Movement, documents how funding from the City of London, a board dominated by figures from the banking sector, and a rapidly revolving door have led to a close relationship between regulators and the financial sector. 

The report exposes the Financial Services Authority (FSA)’s use of its resources to influence financial reform legislation in the financial sector’s favour. It argues that the regulator is working to prevent effective regulation of the commodity markets, where financial speculation has contributed to sharp spikes in food prices.

A text drafted last week by an FSA secondee in the European parliament has proposed to severely weaken European Commission proposals to regulate the commodity markets, failing to reflect the concerns of many MEPs.

FSA staff have been seconded to every UK and EU institution involved in financial reform, and are lobbying MPs in the European...

11 October 2011

Dear G20 Finance Ministers,

We write to you ahead of the October meeting of the G20 Finance Ministers to urge you to commit with your counterparts to take effective action to curb excessive speculation on food commodities. Excessive financial speculation is contributing to increasing volatility and record high food prices, exacerbating global hunger and poverty.

While there are many pressures on food prices, fundamental changes in supply and demand cannot fully account for the dramatic price fluctuations that have occurred in recent years.

In June, a report for the G20 by international organisations including the IMF and the OECD noted that “too much speculation can cause frequent and erratic price changes” in futures markets. Evidence suggests that financial speculators are less likely to make trading decisions based on information regarding supply and demand and are more prone to herding behaviours than commercial traders. Excessive speculation undermines the price discovery function of futures markets, driving real prices away from levels determined by supply and demand.

The High Level Panel of Experts on food security for the Committee on World Food ...

At the recent Barclays AGM, World Development Movement campaigners dressed up as evil Barclays eagles to highlight the bank's role in speculating on food prices. This inspired our favourite cartoonist, Ben Jennings, to take the eagle to new heights. 

© Jess Hurd/World Development Movement

It’s been the hot topic of conversation in the WDM office for last few weeks - the Barclays AGM. In preparation for the big day tomorrow we held a photo stunt at Barclays HQ to hand in the Public Eye 'shame award' that Barclays won earlier this year for its role in food speculation. 

We met inside the Canary Wharf shopping centre already feeling nervous about any security presence as we had been informed that security goes into lockdown as soon as they catch even a glimpse of a banner or placard. Being careful not to draw too much attention to ourselves, we quickly changed into our glamorous evening wear and started to make our way towards the Barclays building. Despite the cold and struggling to walk in four inch heels (not something I do often!) we got some great shots from outside the Barclays offices. We also attracted some slightly bemused looks from office workers who seemed to find the photo shoot good entertainment for their morning cigarettes. 

After finishing the photos came the moment of truth – could...

Campaigners from the World Development Movement will protest at Barclays’ AGM tomorrow, exposing Barclays’ role in fuelling global hunger by betting on food prices.

Where: Entrance to the Barclays AGM, Royal Festival Hall, South Bank, London SE1 8XX

When: 10.30-11.30am, Friday 27 April

Two suited, blue masked Barclays ‘eagles’ on Barclays bikes will join protestors holding placards reading, ‘Barclays banks on hunger’.

The campaigners also staged an award ceremony outside Barclays HQ in Canary Wharf today to hand over a ‘shame award’, which the bank won for speculating on food prices.

The World Development Movement estimates that Barclays made up to £189 million from speculating on food in 2011. The bank is the biggest UK player in commodity markets, and claims to be in the global top three. Massive influxes of speculative money in food markets have been driving sharp price spikes, sending the cost of food soaring beyond the reach of the world’s poorest people.

Barclays CEO Bob Diamond, currently in the spotlight over his £17.7 million pay package, responded to the Occupy movement by telling the BBC in November that banks must be “better citizens”. Diamond...

Last week was a big week for our campaign to regulate food speculation, with developments on the relevant legislation in both the European parliament and Council of Ministers. 

In order to remove the harmful effects of food speculation we need caps known as ‘position limits’ on the amount of contracts speculators can hold in these markets. We’ve been concerned that the European commission’s proposals contain a major loophole which would allow countries to avoid using position limits by instead using 'alternative arrangements such as position management'. 'Position management' is a weak system which is already used in the UK, and has effectively resulted in deregulation. Under this system, hedge fund Armajaro was able to buy up virtually the entire European cocoa supply in July 2010, pushing prices to a 33-year high.

Council of Ministers

Last week, expert civil servants from each of the EU member states met to discuss proposals, including position limits, to regulate speculation on food and other commodities. 

Because these meetings are conducted in relative secrecy, we’ve had difficulty finding out exactly what went on at last week’s meeting. But what we do know is that two of the...

The battle over EU commodity market regulation commences this week, with key bureaucrats meeting in Brussels tomorrow to thrash out an agreement on regulation of commodity derivative markets.

The European Parliament’s rapporteur for the review of the Markets in Financial Instruments Directive (MiFID), German MEP Markus Ferber, said on Friday that he intends to introduce strong controls on financial speculation in these markets:

Highly speculative investment must no longer influence the price of agrarian raw materials. Excessive speculation on foodstuffs and raw materials threatens the smooth functioning of commodity future markets and creates massive price volatility. We certainly need to contain that.”

It is unclear whether the officials from member states meeting tomorrow will make a similar recommendation. The UK government is known to be opposed to the introduction of ‘position limits’, which advocates believe to be the most effective tool in limiting speculative activity in commodity derivatives markets. The UK is expected to block any attempts to remove a loophole which would allow weaker ‘alternative arrangements’ at tomorrow’s meeting. Position limits would set maximum limits for the market share traders could hold.

The...

Knutsford is a small town in East Cheshire, just 16 miles from Manchester. It's known locally for customs such as ‘sanding the streets’ on May day and the three-hour endurance race for penny farthing bicycles every ten years. It’s also home to UK chancellor, George Osborne, who is the MP there.

Today, we take the campaign to regulate food speculation ‘home’ to George Osborne. The local newspaper, the Knutsford Guardian is running a WDM-sponsored, advertisement in this week’s version of the paper:

We're taking the message to his constituency. High global food prices is contributing not just to UK inflation but also making food unaffordable for the poorest people in the world.

George Osborne can do something about it. He is the UK representative at EU talks on new rules to rein in speculation. But he is siding with the City of London and wants to keep the rules weak so that financial speculators can continue betting on food.

We need to get him to change his mind and create public pressure wherever we...

Global food prices are at record high levels, making food unaffordable for the poorest people in the world. The high prices are fuelled by banks and hedge funds betting on food in financial markets. While they reap billions in profits, millions of people across the world are being pushed into hunger and deeper poverty. 

This risky financial gambling on a basic human need is a recipe for disaster. But it can be stopped. Regulating food speculation is on the agenda in the EU and George Osborne - MP for Tatton and UK Chancellor of the Exchequer – will be representing the UK at EU talks where financial regulation is being discussed. 

The UK government is currently opposed to introducing new rules to prevent excessive speculation so it’s time to turn up the pressure.

As your elected representative, George Osborne will pay particular attention to your concerns. It's up to you to do something about this.

What you can do

You can help stop this scandal by writing to George Osborne and asking him to back essential banking regulation to curb food speculation.

Please write a letter to George Osborne MP, Tatton Conservative Office, Manchester Road, Knutsford, Cheshire WA16 0LT or...

This week I read a recent report by Friends of the Earth Europe. ‘Farming Money: How European banks and private finance profit from food speculation and land grabs’ is an interesting read for anyone concerned about poverty and social justice issues. 

The report looks at two major topics: food speculation and land grabs. Anyone who has been following the work of the World Development Movement over the last couple of years will be familiar with food speculation, and WDM in fact contributed to a section in the report about food speculation by British banks. 

In order to address the speculation problem, Friends of the Earth recommends two solutions. The first reform it advocates is increased transparency in food markets, with trade of futures contracts taking place on public exchanges rather than in secret - how the current ‘over the counter’ market operates, The second is ‘position limits’, meaning that there should be limits to how much of food markets can be controlled by speculators. 

Hopefully, the combined pressure of FoE and WDM in making these demands will force a change in the UK negotiating stance within the EU, where the UK has been blocking such legislation.  ...

10 per cent of Europeans are unemployed. To solve the crisis we need to grow… food. The idea of becoming a farmer may not seem very appealing. Isn’t the countryside scattered with producers struggling to eke out a living from supermarket prices that barely cover the cost of production? Driving tractors across vast monotonous landscapes or herding cows into industrial milking sheds? Don’t young people up sticks and head for the city, part of a great wave of migration around the world? 

Oil has taken their jobs. Diverse farming, which needs many skilled workers, has largely given way (in the global north) to giant monocultures powered by fossil fuel-hungry machinery and fertilisers. But with climate change almost at a tipping point and so many millions out of work, it’s clear that this is unsustainable.

Subsidising land grabs in Europe 

At a gathering of activists and food producers from across Europe yesterday, I heard about how some growers and community initiatives are realising an alternative, based on the principles of food sovereignty. But small-scale farmers said they face an uneven policy field. 80 per cent of the payments under Europe’s common agriculture policy (CAP) go to just 20 per cent of farmers. Smallholders are entitled to a...

Soon after it got light on Saturday morning, I set off from a tiny chalet, lugging my bags through a blizzard down a snowy track impassable to cars. The bags were heavier than when I’d arrived, because I was carrying an award. The previous day, Barclays – the UK’s biggest food speculator – had declined to show up to the Public Eye Awards to collect its prize for being the world’s worst corporation. Following WDM’s nomination, Barclays was selected by a jury, while the ‘winner’ of a second prize decided by over 90,000 voters was mining giant Vale.

Last year, WDM revealed that Barclays makes up to £340 million a year from betting on food prices. Our groups across the country helped to bring home to people in the UK what rising food prices mean in the global south, holding sales of impossibly expensive food outside their local branches of Barclays.

But Barclays continues to speculate on food and maintains a close relationship with UK Treasury ministers who are seeking to scupper EU regulation that would curb food speculation. It was time to have another crack and pile on the pressure...

Guest post by Innocent Sithole, used to be Web intern