Food speculation

...to win the worst lobby award.

In July 2010, in just one month, the price of wheat increased by 60 per cent. For us in the UK this could mean higher prices for our biscuits and bread but for those in developing countries, price hikes in basic foods like wheat are disastrous and leads to hunger and malnutrition.

By the end of August, demonstrations against rising food and fuel prices were held in Maputo, capital of Mozambique. “I can hardly feed myself. I will join in the protest because I’m outraged by this high cost of living.” said Nelfa Temoteo, a local resident.

And it’s not the first time. In 2008 the world experienced a global food crisis with rapidly increasing prices for basic food products. For example from early 2007 to mid-2008, the price of wheat shot up by 80% and maize by 90% and then after June 2008, the price fell back down.

So what can explain these huge price hikes? And what has all this got to do with Goldman Sachs? They’re a bank after all - they don’t grow, sell or process food, do they?

Unfortunately, Goldman Sachs has everything to do with these price hikes and this is why I am voting for them. The food price hikes of 2008 and 2010 were caused by speculative money flooding into food commodities markets as more and more...

Jayati Ghosh is Professor of Economics at Jawaharlal Nehru University, New Delhi, and Chair of the Centre for Economic Studies and Planning. In this analyisis for WDM, she shows how financial speculation on food drive the 2007-2008 food price crisis.

Download Commodity Speculation and the Food Crisis here.

The European Commission and the French and US governments have all said they want to bring food speculation into the open and regulate it to stabilise prices. We need to you to help pressure the UK government to ensure that it backs proposals for regulation and not to take sides with the banks to block reform.

Email George Osborne at the Treasury, asking him to support strong and effective regulation to stop banks from betting on hunger. The Treasury is the government department which decides whether the UK will support international regulation to rein in excessive speculation on food prices

Caroline Griffin, Fundraising and communications officer

In July, I went to Kenya to find out how speculation on basic food commodities has affected people’s lives. I've put together a photo gallery which tells the story of gambling on food from the people's perspective.

Many of the photographs are of people I met who had gone without food for days or been forced to sell their few possessions to feed their families. The price of maize, the Kenyan staple food doubled or tripled in a matter of days, causing unnecessary hardship for the fifty per cent of the Kenyan population who already live below the poverty line.

Additional problems such as drought, unemployment and underlying health problems meant that many families reached crisis point when food prices shot up. Some of the people I spoke to are still picking up the pieces after the events of 2008.

But thanks to the World Development Movement, economists, journalists and development experts are now pointing to food speculation as the most significant cause of food crises, including the current food...

Secretive corporate lobbying efforts are being dragged into the open today at the launch of the Worst EU Lobbying Awards 2010 in Brussels. Some of WDM's old and new foes have been nominated for their part in lobbying in Europe to stop progressive change.

In the climate category, supported by: Climate Action Network Europe, Oxfam, World Development Movement. The nominees are:

- BusinessEurope: Nominated for its aggressive lobbying to block effective climate action in the EU while claiming to support action to protect the climate.
- ArcelorMittal: Steel industry fat cat, nominated for lobbying on CO2 cuts under the Emissions Trading Scheme (ETS) and profiting from free ETS emission permits.
- RWE: Nominated for claiming to be green while lobbying to keep its dirty coal-and oil-fired power plants open.

In the finance category, supported by: ATTAC Network, World Development Movement.
- Royal Bank of Scotland: Nominated for secretly lobbying in Brussels and for exploiting insider contacts by headhunting former EU Commissioner Günter Verheugen as an advisor
- Goldman Sachs and derivatives lobby group ISDA: Nominated for aggressive lobbying to defend their ‘financial weapons of mass destruction’
- Hedge fund and private equity lobby groups AIMA...

Kate Blagojevic, used to be press officer

I am sure there are few things that Richard Branson and WDM agree upon; one is the preceding sentence and the second is that excessive speculation by banks and hedge funds exacerbated the food crisis in 2008.

That's all i can think of so in short WDM and Virgin have little in common: WDM has campaigned for the aviation industry's emissions and subsidies to be cut, and on a personal note, Richard Branson throwing Kate Moss over his shoulder and the sexism rife in Virgin ads all make me cross, so it was somewhat surprising to hear conversations about 'a great letter in the Economist from Branson' in the office. But it was true, and regarding this letter in which Branson took The Economist to task over its some of its analysis on the effects of excessive speculation on the price of food and oil.

The OECD report to which Branson refers claims that there is no link between speculation and food prices is widely touted by the banks, and others who oppose reform and regulation which seems to include the Tory party. From Virgin to the World Bank to UNCTAD to the FAO to the UN expert on Food to the US government and to the French government and...

With only five years left to meet the MDGs, WDM has analysed where progress has been made. It is striking that people in Sub-Saharan Africa are being neglected. WDM believes that this worrying trend is at least partly due to a post 9/11 preoccupation with national security interests at the expense of poverty alleviation strategies. This is likely to be entrenched by the UK still deeper if you read between the lines of recent comments by Nick Clegg and Andrew Mitchell that the UK will increase aid for fragile and conflict ridden countries. 

Goal 1: Eradicate extreme hunger and poverty

The flagship target of the MDG programme is that the number of people living on less than $1.25 per day is halved. We appear on course globally, but Africa is being left behind. Sub-Saharan Africa is now the only region where more than half of the population still live in extreme poverty.

Conversely, no progress was made in reducing hunger between 2000 and 2007. Since then we’ve seen the 2008 food price spike, during which, for example, the price of maize meal in Nairobi more than doubled. The result is that hunger topped 1 billion in 2009 and although some of the latest figures show that there has been minimal progress, current high food prices are likely to set...

Wheat prices have hit a two year high. Prices are again climbing steeply for wheat and, despite claims by some analysts in the media, there is plenty of wheat available and talk of global shortages is unfounded.

The last time prices were higher, there was a food crisis and people were going hungry across the developing world, whilst in the US and UK people were paying more for their weekly shop.

Whilst drought, fire and flooding have reduced Russia and Canada's wheat harvest respectively, there is a bumper yield in the United States and global wheat stocks are high. So if the price were based on supply and demand for wheat itself, the price would not be rocketing in the way that it has over the last month. According to Jonathan Barratt, managing director at Commodity Broking Services in Sydney “There are two things driving the market, fear and fund buying.”

Those funds are the same speculators which caused food prices to go so high in 2008, and have sent coffee and cocoa prices all over the place in recent months. Now they are once again pushing up the price of one of the world’s staple foods. It has been reported that speculators bought an unusually high number of wheat contracts in recent weeks.

Some producers of biscuits and bread have said that...

Ingredients
1 full page article in the Guardian newspaper
1 interview on BBC Radio 4 Today programme
1 interview on BBC Newsnight
10 articles across other newspapers
31 articles online
900 sign ups to a phone action,
65 comments on our website

Take all the ingredients and combine well to create heat and froth.

Ok it’s a food campaign so couldn’t resist the analogy to cooking. Last week we launched our new campaign to regulate food speculation in financial markets with an amazing amount of press and media coverage. The story got picked up as it’s the age-old tale of greed at the expense of millions going hungry. Bankers, like Goldman Sachs, are speculating on food prices which have fuelled price hikes in recent years and driving more people into deeper poverty and hunger.

As well as raising profile for the campaign on television, radio, press and web we...

* New report: Gambling by banks like Goldman Sachs increased food prices

* UK must 'back, not block' new banking reform in Europe, say campaigners

* Over 800 people have pledged to call the FSA to demand action to stop banks gambling on food

Today banks have come under fire for risky and secretive gambling on coffee, cocoa and wheat which is playing havoc with prices.

Lovers of chocolate spread on toast with a cup of coffee in the morning face paying more for their breakfast as prices have rocketed on the international markets.

The same banks, secretive hedge funds and dangerous speculation that caused the sub-prime mortgage crisis and global financial meltdown are also causing food prices to rise massively, argues new research from anti-poverty campaigning group, the World Development Movement.

Cocoa prices have reached their highest levels for 33 years, increasing by 150 per cent over 18 months which could force some chocolate makers to raise prices and in some cases use less cocoa.

Although poor harvests acted as the initial trigger for price rises in cocoa, the finger is being pointed at hedge funds and big...

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...

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...

Thank you for joining our fight to stop bankers betting on food and causing hunger.

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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.