Food speculation

George Osborne and his G20 counterparts failed to commit to the controls needed to curb soaring food prices at their Paris meeting which concluded on Saturday.

The finance ministers promised better regulation of commodity markets, where banks and hedge funds bet on the price of basic foods – but campaigners say the measures are not strong enough to prevent speculators driving up prices.

More than 450 economists wrote to the finance ministers ahead of their meeting this week, adding to increasingly vocal calls for controls on speculative activity. ‘With around 1 billion people enduring chronic hunger worldwide, action is urgently needed to curb excessive speculation and its effects on global food prices,’ said the letter.

The French government, currently holding the G20 presidency, is pushing for effective regulation. But ahead of the meeting, UK Chancellor George Osborne, heavily influenced by City of London lobbyists, was expected to prevent agreement on tougher controls at the Paris meeting, alongside the Brazilian and Australian finance ministers.

The US government has already moved...

Rosa Fletcher, used to be activism and events intern

Last week, Bandile Mdlalose, general secretary of the South African social movement Abahlali baseMjondolo was in the UK speaking at our climate justice speaker tour events. While she was here she spoke to WDM staff about rising food prices and hunger in South Africa. 

She told us how rising food prices and the privatisation of land is causing her and her family to struggle to buy more than mielie-meal (a relatively course flour and staple food in many parts of Africa, often made into ‘pap’, a porridge) on a daily basis. South Africa’s 1996 constitution states that every South African citizen has a right to sufficient food and water, yet this has not been achieved. Bandile stated that one of Abahlali baseMjondolo’s roles is to ‘reveal the unrevealed’ and her story around food poverty really highlights this. 

She described how her family and others in South Africa “are living in an environment we are unable to live in.” This is because more people are moving from being food producers to food consumers, vulnerable to price increases and volatility often linked to excessive financial speculation.

She described how her family’s food shopping has to...

• How does betting on food prices in financial markets work? How does that affect the price?
• How do futures prices affect today’s food prices? 
• How is speculation on food prices done and who does it?
• Doesn’t speculation simply follow market trends, not create them? 
• But isn’t speculation supposed to help stabilise markets?
• How do high food prices affect poor people?
• Is it the high price of food or the fluctuations in food price which are the problem? 
• Aren’t high prices good for poor farmers in developing countries as they’ll get better prices for their produce?
• We buy Fairtrade products because it guarantees a high price. Aren’t high prices a good thing?
• Aren’t low commodity prices also a problem for developing countries, surely high prices are a good thing?
• Did the price of all foods rise in 2007 and 2008?
• What has happened to food prices since the food crisis of 2008? Are food prices stable now or are they ...

If we do nothing, we risk having food riots in the poorest countries and also an unfavourable impact on global growth. We want regulation of the financial markets for commodities.”
- Nicholas Sarkozy, French president

We are putting pressure on the UK government to back proposals to regulate betting on food prices in financial markets.

Since July 2010, we have campaigned to raise the issue and it is now firmly on the political agenda in Europe. Proposals for regulation are being drawn up in the EU, but the financial industry, with the help of George Osborne and the UK Treasury, is lobbying hard against them.

These coming months are going to be crucial. The proposals for regulation were published in October 2011 and we will have to keep up the pressure to ensure that they are not watered down by the banking lobby or by the UK government. You can help us now by writing to the Treasury.

Click on this timeline to have a look at what we have done so far...

“It is deeply alarming that the greatest proportion of activity in the futures markets no longer involves those in the supply chain but is, instead, taken up by speculators. Food commodities are too important to be played about with by day traders and speculators”
- President of National Farmers’ Union Scotland

Since we launched the campaign on food speculation in July 2010, we've produced and collected a range of resources on the issue. Here are some of the best.

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  Introducing the issue

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  ...

As a regular reader of this blog you know that we’ve been campaigning for regulation of speculation on food prices for the last 18 months or so. We were therefore pleased to see that the topic of this year’s Blog Action Day, on 16 October, is food. 

The idea behind Blog Action Day – originally started in 2007 – is that on one day a year bloggers from around the world unite and write about one particular topic. Previous topics include water, climate change and poverty and last year 5,600 bloggers from 143 countries took part.

On the day itself WDM staff members will be blogging about food speculation. But what about you? Here are three things that you could do:

1. Write a blog post! 

After all, this is the main point of the day. Just register your blog now, then on 16 October post your blog entry on Twitter using the hashtag #BAD11. We’d love it if you were to write about food speculation and you can find lots of resources to help you on our food speculation resources web page. 

2. Take action!

Proposals to regulate food...

It’s no secret that successive UK governments have long favoured a “light touch” approach to regulating the financial sector. And it’s pretty obvious the mess that this has left us in. But until the research published this weekend by the Bureau of Investigative Journalism, most people didn’t quite realise the influence of the sector over the UK’s main governing party.

Figures published by the Bureau show how the proportion of income the Conservative party receive from the City of London has grown over the past year, and now makes up more than half of the total donations it receives. And within the financial sector, more donations come from hedge funds – big players in food speculation – than any other type of contributor.

These donations dwarf the contributions made by other industries – so it’s not surprising that, despite support for action to tackle food speculation from virtually every other sector of society, from the Pope to Starbucks, the UK government is still failing to support the regulation we need to curb...

 Jessica Radford, used to be campaigns and policy intern

The influx of financial participation in the commodity markets has played a key role in causing price rises and volatility. Prices are increasingly affected by the financial markets, rather than the needs of the consumers and farmers.

As you know we are campaigning to stop banks from betting on food and consequently forcing people into poverty and hunger. The food campaign is calling for regulation, which includes restrictions to be put on speculators preventing excessive betting on food prices and futures contracts to be traded on an open exchange with the banks required to provide more information on their activities.

The Ecologist recently went to Mexico, where they spoke to people about the price of maize tripling in a short time. This is the video they produced.

Food speculation - banks betting on food prices in financial markets - is a massive issue facing the world today. In the last few years, we have seen two major food price spikes, pushing millions of people into poverty. These food spikes were caused by speculation and could have been prevented through effective regulation. 

At the World Development Movement we are campaigning to stop banks betting on food and causing hunger. To explain the issue we have produced this infographic. Hope you like it. Please let us know what you think in the comments. 

For more information about how financial speculation impacts on food prices, see our Broken markets report. 

[Click on the image to enlarge it]

Update 5 October 2011: We have corrected the aid figures and their size relative to banks’ profits from food speculation; they now reflect the latest information.

Dan Iles, WDM's south-west mobiliser, interviews Christina Schiavoni of the US Food Sovereignty Alliance.

On day four of the European forum on food sovereignty, I met Christina from the US. I was very interested to find out about what sort of actions are happening over in the US as well the aftermath of the Wall Street Reform Act passed recently to limit financial speculation on food. In this interview she talks about the urban and rural movements for food sovereignty across the US, including dairy producers, supermarket workers and anti-food speculation protests.

What does food sovereignty mean to you?

To me it means the right of people to define their own agricultural policies, rather than those policies being defined by the World Trade Organisation, the World Bank and the IMF, or multinational corporations.

Can you give me some examples of local initiatives that are involved with enacting food sovereignty in the US?

These are local manifestations of food sovereignty, because I really think that...

Dan Iles

On the 3rd day of Nyeleni, we all took part in a meticulously coordinated action in the town of Krems, the host city of the forum. In this picture based blog post, I will explain how their use of colour, music, openness and most importantly local food to put across the idea of food sovereignty to Austrian public. This MUST come to the UK!

The March:

Setting off from the forum, we all congregated by the courtyard and then headed for the town centre. What with there being such a diverse crowd of young and old, men and women, and languages from across europe there was a lot of energy. The samba band was leading the way, which is always a great way of attracting attention from the public as well as providing a musical rhythm for the protest itself.

As we paraded around all the town's supermarkets, a dedicated team of leafleters were on the case, handing out information on the upcoming event (which I will explain about later) to every unwitting passer by. Each time we passed a supermarket we stopped, held a mini rally, handed out more flyers to the customers, and then moved on again:

Dan Iles, WDM delegate to Nyeleni Europe, explains the structure that makes the forum so exciting.

I want to try and explain a bit about the structure of the Nyeleni 2011 forum as I think it is worth emulating in future organisational structures. The way the forum is organised has been based on the way the 2007 Nyeleni forum in Mali was constructed and many of the ideas come from the global South. It has a particular emphasis on non-heirarchical and participatory structure and is dedicated to hearing the voices of a range of sub groups in society, for example young people, women, young parents, workers, producers, consumers, activists, etc. 

They have tried to give all possible groups, types of people, interests and sections of the food movement a say in the decision making process.  In this way, everyone is given a range of environments with which to express their voice and are therefore not held back by the social limiting factors that can occur in these sort of events. I hope this is of genuine interest to some people who want to organise democratic and participatory events that do not exclude people through societal imbalances such as gender,...

Bristol activist; Dan Iles, gives you a tour of Bristol’s food movement on route to Austria to take part in food sovereignty forum  Nyeleni 2011

I've been given the opportunity to represent both World Development Movement (WDM) and Bristol’s community food projects at the European Food Sovereignty Forum, Nyeleni, in Austria. This forum will be a meeting point for around 400 delegates from producers, consumer organisations (food cooperatives, etc), NGOs and community projects from all countries in Europe. It will be an excellent opportunity for food projects across Europe to share ideas and collaborate their actions so as to forge a fully fledged European food sovereignty movement.

My blog posts over the next week or so will be documenting this forum, the decisions made in the working groups as well as profiling the various radical food projects that have been set up in countries across Europe.

First of all however, I am going to write a bit about my thoughts over food sovereignty and tell you all about projects struggling for its realisation in some parts of Bristol.

...

The G20's version of 'food security' or a global movement for a radically different food system?

Amy Horton, food speculation campaign

Today, the agriculture ministers from the G20 countries will meet in Paris to discuss food security and volatile prices. They may add their voice to the growing call for international action against speculators. But their focus is likely to be on ramping up food production, even as the UN’s top expert reminds us that the problem is more about distribution: a third of food is wasted and nearly half of cereal production goes to feed livestock.

Three quarters of the G20 delegates will be male, and only one of them African – though the continent is home to a quarter of the world’s hungry people, only South Africa is a member of this elite group.

Their rarefied meeting sits in glaring contrast to a gathering of 500 people at a purpose-built camp in the village of Nyeleni, Mali in 2007. Hailing from more than 80 countries, they were mainly food producers representing small-scale farmers, urban movements, indigenous peoples and many others. 

A different vision...

The World Development Movement has called for urgent measures to regulate financial speculation on food prices in the wake of the Horn of Africa famine, revealing that the price of food aid has doubled since 2001.

The World Food Programme paid $390 per tonne of food last year, compared with $200 in 2001. On Monday the organisation said it needed an extra $360 million in order to tackle the crisis now affecting more than 12 million people.

Speculation on food prices by investment banks like Goldman Sachs and Barclays Capital has dramatically risen in the last decade, pushing prices to record levels. Around $100 billion has poured into agricultural markets over the past ten years as financial players have looked for new areas to place their money, without a penny of this going to actual improvements in agriculture.

The US has already passed legislation aimed at preventing excessive speculation on food, and similar measures are being debated in the EU. But the UK government is set to block the European proposals. 

Deborah Doane, director of the anti-poverty campaign group the World Development Movement, said...

"Maybe it's time we went the way of Egypt." This was the conclusion of a Nairobi transport worker, who took part in research into how people are responding to the latest spike in food prices. He is not alone. Researchers from the Institute of Development Studies and Oxfam found "significant anger" among many of the communities in Kenya, Bangladesh, Zambia and Indonesia that they visited in recent months.

Many people are being hit hard by spikes in food prices. One retired government official in Naogaon says that when he goes to the market, "The prices often give me a heart attack."

Admittedly, there are some winners from higher prices - such as export sector workers, though many of their gains are down to long struggles for better wages. But there are many losers, who are going hungry or switching to cheaper, lower quality food. In Bangladesh, people complain of having to eat chicken feet or broken eggs.

People are also having to travel further to find affordable food and work longer to pay for it. Much of the heavier burden is being shouldered by women. Families are breaking up as men migrate to seek work or even form relationships with women food traders.

Workers in informal jobs face many hurdles. In March for example, Dhaka’s rickshaw pullers...

For the last year, WDM has been leading the UK campaign to get new rules introduced to tackle food speculation. We've been focusing our efforts on exposing the role of banks, like Barclays, in driving up food prices and we've been mobilising public pressure to get the UK government to support effective regulation on food speculation. 

The European Commission is set to publish a set of financial reform proposals in the autumn which will include measures to address excessive financial speculation which is causing food prices to rocket to record levels. 

European partners

As a UK based organisation, we are focusing targeting our own government, whose policies we know is a major obstacle to getting effective legislation approved. However, the fight for regulation is not one that we can win alone. And so we have been also investing our energies into building a European-wide coalition of campaigners to ensure that decision makers in the EU...

An action plan supposed to address food insecurity launched today by the G20 agriculture ministers has been criticised by campaigners, who say it fails to fully address the root causes of volatile food prices, including financial speculation, which is driving up prices.

Anti-poverty group the World Development Movement said that opposition from countries including the UK had led to the watering down of proposals that could have seen countries commit to setting limits on speculators’ share of the market.

Deborah Doane, director of the World Development Movement said:

Without tackling excessive speculation, the G20’s efforts to rein in volatile food prices will be wasted. The agriculture ministers have ducked controversy, so it falls to G20 finance ministers to address speculation and the hunger and poverty it causes."

The anti-poverty group has called on the UK government to back EU and international efforts to regulate commodity markets. 

Ms. Doane continued:

The UK government’s stance in defence of excessive speculation is untenable. It must put its weight behind European plans for regulation, putting the needs of hungry people before the profits of banks like Goldman Sachs and Barclays Capital.”...

In a report released yesterday, the United Nations called for the regulation of financial speculation on food prices, to prevent “price bubbles”.

Financial gambling by banks, hedge funds and pension funds causes massive hikes in the price of basic foods, making millions of people go hungry. 

The report by the UN’s Conference on Trade and Development says that due to speculation, prices are no longer driven by supply and demand.

Prices can move far from levels justified by the fundamentals for extended periods, leading to an increasing risk of price bubbles.”  

The report calls for more transparency and international oversight of commodity markets.

Our campaign has been ramping up the pressure on policy makers to take action. Last week hundreds of emails were sent to the members of the European Parliament’s economic affairs committee who voted overwhelmingly in favour of tightening up how derivatives are traded. 

But there is still much to do. The main European legislation that will include provisions to comprehensively regulate food speculation will be published in the autumn. In the meantime, we need to get the UK government to back regulation. Please...

Earlier this week, the European Parliament’s economic affairs committee voted overwhelmingly – 36 against 1 – in favour of a draft law to regulate shadowy derivatives trading. Derivatives are complex financial contracts that can be bought and sold and are the way that banks can speculate on food prices. One of the demands of our food speculation campaign is that food derivatives are traded on ‘open exchanges’ where they can be regulated properly and all trading is transparent, in the same way shares are traded on the stock market. 

Just before the vote, our European partners over at Make Finance Work produced an e-action asking MEPs on the economic affair committee to vote in favour of the proposals. In just a couple of days over 2,000 people, including hundreds of WDM supporters, wrote to their MEPs and we believe it had an impact on the outcome of the vote. Thank you for taking part.

The proposals would introduce central clearing – bringing trading out from current secret bilateral deals and allowing regulators to see who is trading what. However, although...

• Campaigners take food speculation protest to Barclays’ AGM
• New research shows true extent of Barclays food speculation activities
• Barclays accused of ‘profiting from hunger’

Following a month of protests at over 22 local Barclays’ branches around the country [1], campaigners from the World Development Movement [2] protested at the Barclays AGM this morning over the banks leading role in food speculation. The campaigners - dressed as Barclays eagles, bankers and selling food at hugely inflated prices - say speculation is fuelling the price of staple foods, and having a disastrous effect on the lives of millions of the poorest people across the world.

The protests come following research published by the World Development Movement yesterday that investigated the extent of Barclays’ involvement in food speculation, and found Barclays to be the UK’s leading bank in food speculation [3].

The report concludes that Barclays could be making as much as £340 million in profit annually from food speculative activities, leading to accusations from campaigners that Barclays is ‘profiting from hunger’. In addition, Barclays have been found to be a key facilitator in helping other financial players – such as pension funds – speculate on food...

Catherine Negus, used to be Campaigns Assistant

The WDM campaign against speculation on food prices has had some brilliant radio coverage in 2011. Our campaigns officer Heidi Chow called in to You and Yours back in January, and with the help of the BBC we’ve been able to make two other programmes available for downloading from the WDM website.

On 13 January BBC Radio 4’s Face the Facts by John Waite, with input from WDM, provided a clear overview of the issue. The programme includes helpful explanations of spot and futures markets, how they are supposed to work, and what they are doing in reality. There are quotes from Jane Anyango, chairperson of Kibera Women for Peace and Fairness in Nairobi, who talked with WDM staff when they visited Kenya last July.

Other authoritative voices are those of Jayati Ghosh, professor of economics at Jawaharlal Nehru University in Delhi, and Michael Masters, a US hedge...

On the front page of the Sunday Times this morning you will see the headline ‘Euro MPs exposed in ‘cash-for-laws’ scandal’ (£). Journalists from the respected Insight investigative team have posed as financial lobbyists and have approached MEPs offering them large sums of money in return for watering down banking reform legislation.

Three MEPs took the bait and were employed by the fake lobbying company on a yearly salary of €100,000. One of those was 56 year old former Romanian deputy prime minister, Adrian Severin, who apparently emailed the journalists posing as lobbyists writing “Just to let you know that the amendment desired by you has been tabled in due time”. He then sent an invoice for €12,000.

The other two MEPs caught up in the scandal were Slovenian foreign minister Zoran Thaler, and former Austrian interior minister Ernst Strasser. It is said that Ernst additionally boasted about serving at least five commercial clients who each paid him €100,000 per year.

These are pretty shocking revelations. But the most telling quote in the Sunday Times expose comes from Adrian Severin, “I didn’t do anything that was, let’s say, illegal or against any normal...

Catherine Negus, used to be Campaigns Assistant

Today marks the launch of Fairtrade Fortnight 2011, a celebration of the most widely-recognised ethical label. Fairtrade sales broke the £1 billion mark last year, showing that even during a recession, many consumers still consider the impact of their buying decisions.

However, there’s a very long way to go before all trade is fair, and it’s unlikely that schemes like Fairtrade can bring this about by themselves. Part of their strength is that by using market solutions and focusing on changing public attitudes, they do not alienate anyone. But this approach is also a weakness. The need for Fairtrade schemes is a clear sign that the current global economic system only makes the rich richer.

Commercial giants

The monopolies of huge companies like Cargill, ConAgra and Unilever and of the supermarkets keep selling prices low at the expense of producers. This keeps farmers in the global south working for survival, with little chance of building up their own economies. Often small farmers, who can be very efficient at producing food and protecting the environment, cannot survive.

Fairtrade supports the income of its producers in the global south, and, says Deborah Doane, WDM’...

Over 100 European and international organisations are calling on the G20 Finance Ministers, who are meeting this weekend, to rein in speculation on food prices by banks, hedge funds and pension funds.

The Finance Ministers will be discussing responses to the record food prices which are at ‘dangerous’ levels according to the World Bank with 44 million more people pushed into poverty since last June. French President Nicolas Sarkozy, currently the head of the G20, is pushing for tighter regulation of commodity markets in order to reduce food price spikes and volatility.

But there are concerns that some governments, including the UK, could try to block reforms in the EU and G20 due to fierce opposition from the banking industry. Strong statements have been made by key EU decision makers, including Commissioner Michel Barnier and the French Government, on curbing speculation, but it remains to be seen whether European financial reforms will deliver.

In a statement signed by the Fairtrade Foundation, Friends of the Earth Europe, New Economics Foundation, Corporate Europe Observatory and over a hundred more groups from around the world, political leaders are warned...

Over 100 European and international organisations are calling for financial speculation on food prices by hedge funds and investment banks to be reined in.

The World Development Movement's response to the High Level Panel of Experts for Food Security and Nutrition consultation on food price volatility.

Press release, 04.02.2011

At a joint press conference, Director-General Jacques Diouf of the UN Food and Agriculture Organisation and the French Agriculture Minister, Bruno Le Maire called financial speculation on food both economically dangerous and morally unacceptable. They called for an international response at the G20 to the record food prices and volatility including regulation of financial speculation on commodity markets. The World Development Movement welcomes this and supports action to tackle dramatic food price rises and volatility by reducing speculation on food by banks, hedge funds and pension funds.

Julian Oram, head of policy at the World Development Movement said:

“We welcome the FAO and French government’s clear and urgent call for action to curb financial speculation on food. Banks and hedge funds are playing a key role in causing the current record food prices. When speculative flows of hot money pour into commodity markets, it dramatically pushes up the price of basic foods. There are of course long-term upward pressures on food prices, for example due to the impacts of climate change and the use of land for biofuels. But this doesn’t explain the sudden and very dramatic prices rises that we are seeing now and in 2008 during the food...

The World Development Movement criticised the findings of the Beddington report which promotes the introduction of genetically modified (GM) crops as a key solution to global hunger.

The focus on GM in the Chief Scientist's report is a red herring and does not correctly identify the real causes of hunger.

The World Development Movement's director, Deborah Doane said: "The Beddington report does not accurately reflect the real cause of hunger in developing countries. The current record food prices are down to banks and hedge funds betting on food. The hot speculative inflows of money into commodity markets are dramatically pushing up the price of foods like bread, sugar and corn.

 "GM is not a magic bullet to cure global hunger. If the UK government really wants to reduce hunger in the developing world, they should break free of the grip of the GM and banking lobbyists, and crack down on predatory speculation by banks and hedge funds which will ensure stable and lower food prices. Furthermore, the UK government should be focused on supporting strengthening local markets and investing properly in small scale farmers in developing countries.

 "There is a long-term, gradual upward pressure on food prices, for example due to the impacts of climate...

Current soaring food prices are being worsened by record levels of financial speculation, according to a leading UK anti-poverty group. Latest figures from the World Development Movement reveal that hedge funds, investment bankers and pension funds have poured over $200bn into food markets since the financial crisis, betting on the rising price of food.

This huge wall of speculative money has now reached record levels according to the US commodities regulator [1]. This has caused the market to over-react to shortages in supply or rising demand, pushing food prices ever higher.

This week the UN’s food price reached a record high and food riots broke out in Algeria as the impacts begin to be felt around the world [2]. Food prices have now risen above those seen during the global food crisis of 2008 [3] when riots broke around the developing world and over 1 billion went short of food.

Many speculators are simply trying to avoid inflation by throwing money into food markets, betting on long term rising food prices and not reflecting the current state of global food markets. Much of this money has come from efforts to deal with the financial crash like the banking bail out and so-called ‘quantitative easing’ in Europe and the US.

The World...

Heidi Chow, Food campaigner

Last Friday, WDM’s human blackjack game won Third Sector’s digital campaign of the week. Third Sector is the UK’s leading publication for the voluntary and not-for-profit sector and has over 80,000 readers.

Third sector praised WDM’s web based campaign:

"The subject area of the campaign is a difficult one to convey…However, WDM has taken a fun and interactive approach to drive home its message, meaning it is less complex and more engaging…"

The online game has had over 5000 views and takes people on a journey into the shadowy world of food speculation. Players select a character to play and as they play the card game, blackjack (also known as 21 or pontoon), they discover the gambling that takes place every day in the financial markets where bankers’ betting on food prices is driving up the price of basic food across the world.

The game is still online, play it here and get yourself onto the leaderboard. Remember all that is required is compassion – not cash.