In 'The great hunger lottery', World Development Movement has compiled extensive evidence establishing the role of food commodity derivatives in destabilising and driving up food prices around the world. This in turn has led to food becoming unaffordable for low-income families, particularly in developing countries highly reliant on food imports.
Food campaign news
Food speculation
The US Senate is expected to approve a landmark bill on Wall Street reform later today, covering bank bonuses, financial transparency of complex derivatives, regulation of hedge funds and food markets. This legislation will send shockwaves across the global financial sector, but WDM fears that proposals for a similar EU crack down of the banks may not be backed the UK government.
US legislators have been under enormous public pressure to regulate secretive and complex derivative trading, which is blamed for triggering the global economic crisis.
France and other European nations are strongly supportive of similar proposals at the EU level, but we are concerned that the UK government could seek to block such reforms and are launching a new campaign next week to push the government to take the lead in pushing for financial reform in Europe. We point to the City of London’s track record of lobbying against EU efforts to force the so-called ‘shadow banking’ system out into the open, and are launching a campaign to get the government to crack down on excessive speculation by the banks.
Deborah Doane, director of the World Development Movement said:
“While the US is passing legislation in this area, the EU is well behind the curve. Because...
In The Great Hunger Lottery, the World Development Movement has compiled extensive evidence establishing the role of food commodity derivatives in destabilising and driving up food prices around the world. This in turn, has led to food prices becoming unaffordable for low-income families around the world, particularly in developing countries highly reliant on food imports.
Nowhere was this more clearly seen than during the astonishing surge in staple food prices over the course of 2007-2008, when millions went hungry and food riots swept major cities around the world. The great hunger lottery shows how this alarming episode was fueled by the behaviour of financial speculators, and describes the terrible immediate impacts on vulnerable families around the world, as well as the long term damage to the fight against global poverty.
In the report we describe how the current situation came to pass, the risks of another speculation induced food crisis, and what specifically can be done by policymakers here in the UK as well as in the US and EU to tackle the problem.
Rosie Rogers, used to be campaigns and policy intern
Bright-eyed and ready to save the world in one internship, I was ready to take on any challenge! As part of our new commodities campaign. I was asked to find out how to complain about Goldman Sachs (GMS). A simple task I thought…
FSA: "You have no rights"
First stop, the Financial Services Authority (FSA). I called the general enquiries number and was met with a friendly 'customer services' handler who was happy to answer my questions, but kept asking who I worked for and where I was calling from - my poker voice served me well!. I was told that the FSA don’t deal with formal complaints and that since I’m not a GMS customer, I 'have no rights'.
I was advised to make a formal complaint with GMS, then they had 8 weeks to respond and if the response was not satisfactory, I should take my case to the Financial Ombudsman Service who was ‘better equipped to deal with complaints’. I then stated to my previously friendly FSA buddy – who was now slightly fed up – that it’s ridiculous that only customers have rights, to which he reeled out some standard FSA statement about what the FSA can and can’t do. I was sent a standard leaflet on how to make...
I’m really pleased to see that journalist and art critic Johann Hari, described by the Daily Telegraph as one of the most influential people on the left in Britain, wrote a piece for the Independent last week urging people appalled about bankers speculating on food prices and causing hunger to get involved in WDM’s food speculation campaign. The article was circulated widely on the internet, including being passed on by Stephen Fry, and also appeared in the Huffington Post on Saturday. In it, Hari writes:
Only one force can stop another speculation-starvation-bubble. The decent people in developed countries need to shout louder than the lobbyists from Goldman Sachs. The World Development Movement is launching a week of pressure this summer as crucial decisions on this are taken: text WDM to 82055 to find out what you can do.”
He describes how deregulation of commodity markets in the 1990s has enabled bankers, such as Goldman Sachs and Deutche Bank, to speculate on the price...
Thank you for joining our fight to stop bankers betting on food and causing hunger.
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Baffled by 'derivatives'? Do you know your 'over the counter' from your 'hedge'? Food speculation is an issue that can get quite technical but here's our jargon busting glossary which will help steer you around the murky waters of financial markets.
Clearing exchange
A clearing exchange acts as the intermediary between the buyer and seller of a derivatives contract. So instead of the buyer and seller interacting directly, the clearning exchange becomes the buyer to each seller, and the seller to each buyer, of a contract. The clearing entity makes the payments to each side of the deal,
covering the buyer and seller from the risk of the other side defaulting. This in turn provides financial stability by insuring both parties against default.
In contrast, derivative contracts which are sold directly between two parties (see over-thecounter derivatives below) can be defaulted on as either side may not deliver either the goods or the money. It was non-payment of derivatives
contracts (not traded through clearing exchanges) which contributed to the 2007/08 financial crisis.
In return for being protected from default, buyers and sellers pay a fee to clearing
exchanges. This protects traders from default by the other party and creates a...
Banks are earning huge profits from betting on food prices in unregulated financial markets. This creates instability and pushes up global food prices, making poor families around the world go hungry and forcing millions into deeper poverty.
What is the problem?
Big investment banks are betting on the price of staple foods, like wheat, maize and soya. This is causing food prices to rise and making people go hungry.
Read more
What is being done?
WDM is campaigning to put pressure on the UK government to back...
Tim Jones, used to be policy officer
I don’t drink coffee. Good job as the price of coffee traded in London shot-up by 20 per cent in just three days at the start of this week.
What could possibly cause such a huge jump in prices? Maybe it’s extra demand for the stimulant after the lack of stimulation in the first week of world cup matches? Seems unlikely.
Has a massive catastrophe wiped out huge swaths of coffee production? Not that I have heard. World exports of coffee have fallen a bit between October and April. But this should cause a gradual rise in price, not a sudden spike.
The Financial Times reports that hedge funds have been betting on the price of coffee falling for the past two years. This betting or speculation has depressed the price of coffee, leading to lower prices for farmers, but a cheaper cuppa for you.
Earlier this week one unidentified trading company decided to call the hedge funds on their bets; they asked for them to sell some real coffee. This is a bit of a problem in the world of speculation, where contracts in food are continually traded without any food changing hands. The hedge...
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