Food Profiteering: Investing in Starvation


According to the Independent on Sunday . . . giant agribusinesses are enjoying soaring earnings and profits out of the world food crisis which is driving millions of people towards starvation.

Why am I not surprised?  I read an article on the Food First website a while ago saying pretty much the same thing.  In fact, much has been written lately about the growing food crisis and the blame game is in full swing. 

I’m aware that there are other factors contributing to the jump in food costs and as I said, there have been many explanations put forward as to what is causing the crisis.  Pete from Change Alley has a good post up here but even so, it seems so wrong that the traders are allowed to worsen the situation and play their market games with blatant disregard for the human costs.

People are starving, there’s a major food crisis and what do the fat cats do?  They turn it to their advantage.  There’s this little known thing that the financial market guys call speculation.  Speculative trading is inflating the food prices.  When it comes to food, this free, unregulated practise is bloody immoral and questions should be asked as to whether it ought to be strictly controlled.  They have no right to use food like this.  Food is a basic human right and as yet, there is enough of it to go round but the greedy fat multinationals are obstructing access to this food in order to seek more profit.

There’s no actual, physical food shortage, not yet anyway.  There is just the inability to afford it.  The disturbing thought is that children are starving because the speculators are seeking to profit from the situation.  Hungry people are being priced out of feeding themselves because the profit-driven traders prefer to “invest in starvation“. 

Yes, big business and the elite continue to monopolise the fruits of this Earth while millions of people starve.

Nothing changes.

 

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24 responses to this post.

  1. The big fear is that this food crisis will legitimise GM crops, opening the door for even greater profits for people like Monsanto. Now I still there’s a persuasive case for GM in a small number of specific cases, like BASF’s blight-resistant potatoes, but I would be very worried by a world-wide panic rollout of GM in what would probably be the last gasp of industrial agriculture before Peak Oil.

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  2. That would concern me too Pete. Any knee-jerk leap to GM crops to try and solve the crisis would be grossly ill-judged.

    And Monsanto is already greatly profitting from the food crisis.

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  3. What I believe happens to these people is hat they are envious of the huge profits oil corps are making.

    I don’t think for a moment that GM crops will be going to lower prices, once agricultural prices have risen nothing will make them moderate.

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  4. Or perhaps returning to the old system of growing for one’s own consumption might open many eyes.

    It is Free Trade that is causing all these problems. That prices cannot be controlled effectively poses the question whether the system must be changed, giving more protagonism to governments.

    But again I am talking Democracy here.

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  5. What I’ve read in the IHT is that governments across the world stopped stockpiling food supplies. These stockpiles used to cushion food price rises. The spot market hasn’t helped this either.

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  6. “Food is a basic human right and as yet, there is enough of it to go round but the greedy fat multinationals are obstructing access to this food in order to seek more profit.”

    Eh? How are the agricultural companies restricting access? If they were to do that, they would need to build up stocks…keep food off the market, wouldn’t they?

    Even a most cursory glance at the figures for stocks shows that they are falling…so no one is in fact keeping food off the market in order to raise the price.

    Which makes the rest of your indignation somewhat moot really.

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  7. Well fair point if you don’t believe speculation is occurring. Many economists think it is linked to the crisis. It’s driving up the prices which at the end of the line “obstructs access”.

    And in any case, why does it make the rest of my indignation moot? The huge multinationals are monopolising agriculture. The financial elite of the world have taken control of the world’s food and the multinationals are profiteering from the crisis.

    I am unashamedly indignant.

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  8. Of course there’s speculation in food, just as there is in any other commodity. Even the Wall Street Journal has recommended stocking the pantry; food inflation beats conventional investment returns by a mile.
    http://online.wsj.com/article/SB120881517227532621.html

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  9. Isn’t the rise in prices the thing that attracts new entrants to the market? To increase supply and push the prices back down again? So it’s a good thing, no?

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  10. Possibly, if you see the world as just a case study in classical macro-economics. Unfortunately, the damage that’s caused during the process of adjusting to price rises rarely makes its way into the textbooks.
    Given the rate at which food demand is rising around the world, producers will have to go some to increase supply enough to bring prices down. Their ability to do that is restricted by the supply of other ingredients such as energy, water and , of course, land.

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  11. Yeah, Bishop, Pete’s right. Whilst prices going up indicate to farmers what’s best to plant for returns, it doesn’t mean they can. As Pete says, other variables come into play. In the meantime people starve and governments fall and even wars flare up. That’s a high price to pay for believing in the markets. Grain stockpiles were designed to mitigate against these crisis’s.

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  12. Thanks guys.

    There’s an interesting article in the New Statesman. Nothing new really but worth a read when you have the time.

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  13. Pete, Matt

    I don’t think saying that the process of adjustment is difficult takes away from my point that the price rise is a necessary signal to get more players into the market place.

    I think you’re both getting confused over what is actually causing the starvation here. It’s not fact of the market, so much as that there isn’t enough food. If you didn’t have a market you’d still not have enough to feed everyone. It’s just you’d not get a signal to tell you to do something about it until people started dropping dead.

    I don’t disagree that the process of adjustment (to changes in supply and demand) will be difficult. What I’m saying is that you will actually get a process of adjustment if and only if you have a price signal.

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  14. Bishop I hear what you’re saying. Price signals, as you call them, are an important ‘market signal’ to farmers on what to grow for returns on their hard work, particularly when they don’t just rely on a subsidy dictat.

    My point is that grain stores used to work along side the market system to cushion the swings in market prices and food supply. Under this system there was enough food, even if a country got hit by drought (as food aid would kick in).

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  15. Starvation is not primarily caused by food shortage. I know that food stocks are declining and that there are regional shortages but there is still enough food produced overall to feed the world. Gawd! There must be enough if the West can throw so much of it away and still be overweight.

    Trade injustices are one of the root causes of hunger. And market speculation is exacerbating the problem, as is the rush to biofuels etc. etc . . . .

    The system throughout discriminates in favour of the West – the multinationals and the dealers and it desperately needs reforming.

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  16. “Starvation is not primarily caused by food shortage”

    This is still true, although maybe not quite as true as it used to be, given sudden hikes in demand as the new middle classes in the developing countries get a taste for Big Macs.
    What is true is that the price of food no longer has a direct relationship to the supply. We come back to the original point of this post, that food markets are being grossly distorted by speculation.
    Food is just a commodity, traded on global markets. Commodities are regarded as a safe haven into which investments are switched at the touch of a button in reponse to uncertainties in other markets. Things aren’t exactly helped by cunning little tricks like futures trading.

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  17. ‘Futures trading’ …. Hmmm, electronic grain stores, but without the grain. Betting on what might be soon seems a daft passtime but then, it’s invented by countries that no longer produce real products. Guess the little earthlings have got to bide their time somehow. Like the H&S and security industries in the UK … created out of thin air! And damned annoying too.

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  18. Pete #16, that’s well summed up.

    Like Jose said, free trade causes many injustices and the system needs to change. This futures trading needs controlling. In my humble little view anyway.

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  19. It’s worth pointing out that farmers have engaged in hedging contracts for as long as recorded history. There is evidence that the Babylonians engaged in forward sales. The history of futures is not as long, but still hundreds of years. It’s pretty important if you’re a farmer – would you borrow money to buy seed if you didn’t know what price you’d get in six months time when you got it to market? And why do you think farmers enter these deals if they’re not getting something out of them?

    There is a strong suggestion that the alleged rising demand in China and India is not a significant factor in the current price surge. These countries’ share of the global market hasn’t changed (according to the FAO). It would be pretty surprising for demand to change so suddenly anyway. Something cultural like taste in food would surely change over many years rather than a single year. Either way, Pete’s claim that the price is no longer related to the supply is an odd one. Price is always driven by supply and demand. The relationship is the same as it’s always been. Speculators have always been with us (see my point above about hedging contracts in the ancient world) and they can only change things in the short term and only then if they can find people to do deals with. Nothing has changed here.

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  20. I think you’re confusing things by blurring the distinction between the two categories into which futures traders are conventionally classified; hedgers and speculators. Despite recent bad publicity for the billion-dollar global hedge funds, hedging has a long and mostly honourable history, as you rightly point out. Quite right for both sides of a traditional contract to know what price it will be exchanged at on delivery.
    Speculators are a completely different species, having no direct interest in the commodity either as producer or consumer. They are merely betting on market changes to make a paper profit.

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  21. I don’t think you’re right here. If a bank offers to buy a farmer’s wheat six months forward and the farmer accepts, why should the bank actually need to take possession of it at harvest time? They don’t want it! But they have got the capital to make the promise to the farmer that makes his business secure, and they want to use it to make a profit. The farmer is happy because he gets his guaranteed price, and if it makes a profit the bank is happy too. Why do you insist that the bank has to take possession of the wheat to make the transaction an acceptable one? What is this adding?

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  22. I don’t understand this. Why would a bank enter into a contract with a farmer to buy wheat in 6 months time and then not take delivery of what they had bought? They could, I suppose, hand over the money as agreed and let the farmer keep the wheat, but the guy signing off on that arrangement would soon get the sack. Wikipedia he say:

    “A futures contract gives the holder the obligation to buy or sell, which differs from an options contract, which gives the holder the right, but not the obligation. In other words, the owner of an options contract may exercise the contract, but both parties of a futures contract must fulfill the contract on the settlement date. ”

    That means the farmer gets the money he wants, and the bank gets the wheat. What the grain wholesaler thinks about the bank muscling in on his business is another matter.

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  23. All I’m saying is that the bank wouldn’t want to take delivery of the wheat. They’d sell it on, having provided the service to the farmer and having made their profit.

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  24. Which brings us almost back to where this thread started, with middlemen taking their cut and driving up the price of food for people who just want to eat.

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