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 Food Futures Behind Rising Prices
7th May 08 - Anil Netto, IPS News
With stock markets and the property sector in
the United States weakening, speculative investors are turning to fuels
and the food sector as a "safe haven", driving up prices in the
process, say some food security activists. This is the
logical sequence from the transformation of food from a basic human
need to an economic ''commodity'', they point out. This has made it a
lot easier for investors and trading houses to regard agricultural food
as a legitimate target for speculation, hoarding and market
manipulation, especially though the futures market.
Critics point out that neoliberal policies promoting the opening up of
the agricultural sector and the promotion of cash crops are now coming
home to roost. Such policies have led to a loss in food
self-sufficiency in many nations.
Some analysts argue that supply and demand factors alone
cannot account for food price hikes. Instead, they point to a likely
bubble, fuelled by speculative investors, hedge funds and even new
funds that are investing in agriculture as a safe haven from the
economic troubles in the United States.
The easing of U.S. monetary policy and a weakening dollar on the back
of a U.S. recession has also driven up commodity prices. This is made
worse by food exporting nations restricting their exports to ensure
that they are not faced with unexpected food shortages domestically.
This food price bubble, however, could burst as the U.S. recession
leads to a global slowdown.
In India, for instance, speculation has taken its toll. ''The
hoarding has been done by the big corporate houses and with the help of
multinational corporations,'' said Krishan Bir Chaudhary, president of
the Bharatiya Krishak Samaj, India's largest and oldest national
farmers' organisation with five million members.
There has been heavy foreign direct investment as well as futures trading by MNCs in the food sector, he pointed out.
Ironically, there is no shortage of food supply either at the global or
at the domestic level -- though food stocks have fallen. In fact, the
International Grain Council (IGC) expects world wheat production to
reach 645 million tonnes for the 2008/2009 season, an increase of 41
million tonnes over the previous season.
Global rice production meanwhile is expected to rise by 1.8 per cent --
or 12 million tonnes -- this year, said the UN Food and Agriculture
Organisation in a report last month. Paradoxically, international rice
prices have soared 20 percent since January because of "limited
supplies available for sale", given the restrictions by key exporting
nations.
Krishan said, according to official estimates, India itself
has achieved a record grain production of 220 million tonnes, with the
production of rice, wheat and pulses hitting new highs. ''We have
enough food, and production has shown an increasing trend, but it is
the big corporate houses who are twisting the prices,'' while farmers
receive the lowest prices, said the wheat farmer in Ghaziabad in Uttar
Pradesh, India's most populous state.
What does he think of the speculators? ''They are blood-suckers,'' he
said, angrily, during a telephone interview with IPS. Despite the good
production, there has been a deliberate manipulation of food prices
both globally and locally, he said. A few corporate players in the food
business are buying produce from farmers cheap, hoarding stocks and
manipulating prices.
Krishan wants the government to ban futures trading in agriculture and
to reject the neo-liberal and corporate-led agriculture model and
replace it with a farmer-centric one.
'The country is facing a lot of problems after
liberalisation," he lamented. He said that more than 200,000 farmers in
India have committed suicide since 1996 after policies suited to the
global market were imposed on farmers.
At the global level, he pointed out that Sub-Saharan countries were
food-secure nations before 1980. But after implementing liberalisation
policies advocated by international financial institutions, some of
these countries went ahead with the production of cotton and coffee for
the MNCs. ''Now (these countries) are asking for food,'' he said. ''It
is a very simple example of how these financial institutions are
pressuring developing countries to lose food security.''
Such liberalisation, in the past, promoted the dumping of
cheap food in developing countries and the drive towards
industrialisation and cash crops while dismantling protection of local
farmers and agriculture. Countries like Malaysia also saw their
self-sufficiency in rice falling from around 90 per cent in the 1970s
to around 70 percent now. Today, rice prices of non-controlled grades
are rising here.
''Rice is now seen as a commodity for trade and so you have all this
speculation and hoarding that is taking place," said Sarojeni Rengam,
director of Pesticide Action Network's Asia Pacific regional office
here.
The Malaysian authorities once felt that they could get cheap
rice from elsewhere, and so they neglected self-sufficiency in rice,
she said. ''It is important that we produce enough rice in a safe,
sustainable and ecologically friendly way,'' she stressed.
Like Krishan, Sarojeni also felt that the conversion of agricultural
land for bio-fuels is not yet a huge factor behind rising prices in
Asia unlike elsewhere. ''But the potential for it to be expanded is
there,'' she said.
She had just returned from participating in an international
fact-finding mission in the north Borneo state of Sarawak, where oil
palm plantations and state agencies are taking over native customary
land from local communities, which used to grow their own fruit,
orchards, rice and vegetables. There are now 173 cases in court
relating to land ownership.
''The development of oil palm plantations at a rate of seven percent
covering more than 40 percent of land in Sarawak has tremendously
reduced food production; destroyed the rivers where communities
depended on the fish,'' the team observed in a statement issued at the
end of their mission. They noted that the pollution of the rivers,
particularly with highly hazardous pesticides and of the environment
had affected the health of communities with increase in diseases.
Sarojeni noted that there had been little investment in rice
production. That could change as the Malaysian government now takes
steps to boost spending in food production and agriculture. But some
worry that the renewed interest in agriculture could take the form of
corporate agriculture - with expensive inputs of fertilisers and
pesticides - that could turn farmers from independent decision makers
to contract workers.
Malaysian multinational corporation Sime Darby, for instance, is
planning to wrest control of the food chain, from the supply of seeds
to farmers to retailing through hypermarkets. Nestle, on the other
hand, is eyeing red rice cultivation in Sarawak for its manufacturing
needs.
Certainly not everyone is hurting from higher food prices. GRAIN, an
international group which promotes the sustainable management of
agricultural biodiversity based on people's control over genetic
resources and local knowledge, pointed out in a report that huge
profits are being made by large food corporations, grain traders and
investors and traders such as Cargill, Bunge and ADM, which have all
experienced profit surges ranging from 67 percent to 86 percent. Global
retailing giants such as Tesco, Carrefour and the Walmart have also
seen profit increases.
Agricultural policy has lost touch with its most basic goal: that of
feeding people, noted GRAIN. Rather than rethink their own disastrous
policies, governments and think tanks are blaming production problems,
the growing demand for food in China and India, and biofuels, it said.
''While these have played a role, the fundamental cause of today's food
crisis is neoliberal globalisation itself, which has transformed food
from a source of livelihood security into a mere commodity to be
gambled away, even at the cost of widespread hunger among the world's
poorest people.''
Link to original source
Food prices continue to rise worldwide
25th February 08 - Naomi Spencer, World Socialist Website
Recent developments in grain markets point to prolonged international
supply shortages and price spikes, exposing billions of people
to hunger and malnutrition.
US commodity exchanges have seen extreme volatility in the
past week, with speculation on spring wheat crops driving per-bushel
prices to record levels, while high oil prices and severe weather
have contributed to rising corn and soybean prices.
Last week, the three US Midwest grain exchanges—the Minneapolis
Grain Exchange (MGE), the Kansas City Board of Trade and the Chicago
Board of Trade—all raised their daily trading limits to triple
the previous ceilings, encouraging rampant speculation and substantially
heightening trade activity.
On February 15, trading on the anticipated March wheat crop
hit $19.88 a bushel on the MGE, the highest price ever, and 79
percent higher than a year ago. The surge came on the announcement
that Japan had purchased 190,000 tons of US wheat shortly after
the Egyptian government bought 235,000 tons, and in anticipation
of weather-related food disruptions in China.
The US Department of Agriculture (USDA) has warned that the
nation’s wheat inventories are dropping dangerously low.
In part, this is due to the fevered rate of exports driven by
the weakening dollar and relative strengthening of currencies
of many importing countries.
By June, the USDA projects that actual stores of wheat will
fall by 40 percent, to the lowest level in three decades. Goldman
Sachs’ February commodities report put world wheat stocks
at the lowest level since 1948.
The world food shortage cannot be understood as a temporary
phenomenon or a simple supply and demand dilemma. Rather, a number
of complex and interrelated forces are behind the development,
all of which underscore the inability of capitalist markets and
institutions to rationally plan and provide for human needs.
Following the collapse of the housing market and subsequent
crisis in the financial sector, much speculation shifted from
those areas into commodities, which are considered to be more
stable and, in US trading houses in particular, less vulnerable
to the unfolding recession. Agricultural commodities are seen
as a “safe bet” for investors; people need to eat, no
matter how inflated the price of food.
It is precisely this attitude that makes agricultural markets
extremely vulnerable to crises, and increases the hunger threat
posed to the world’s population. The prices of crops are
negotiated not when they are harvested, but well in advance, in
anticipation of future yields, production needs, and so on. Agricultural
producers sell so-called “futures contracts” on crops
several months before harvest, thereby guaranteeing certain prices.
Grain distributors and processors buy these futures contracts,
guaranteeing they will not pay more upon harvest.
However, futures contracts cannot guarantee that crops will
survive, or that they will meet demand when harvested. Shortages
or blights, which can be ruinous to farmers and consumers, are
often celebrated by speculators, who buy up futures contracts
and turn profits on unmet demand.
Speculation generates volatility, in turn triggering yet more
speculation. Since the eruption of the credit crisis, the grain
market has assumed an increasingly volatile character, forcing
up retail inflation and worsening the effects of economic downturn
for the working class population.
Agricultural production is vulnerable to shocks because it
is intimately connected to climate trends, declining water tables,
and weather-related disasters.
Agriculture is also affected by fluctuations in the energy
market. The distribution of grain is directly impacted by transportation
costs, tying grain prices to oil prices. This drives prices up
especially in countries dependent upon sea-shipped imports.
Further, farming and processing operations are more expensive
when oil rises, not only because of fuel costs, but also because
the cost of fertilizer, the nitrogen of which is made from natural
gas, is bound up with energy market trends. USDA figures show
that fertilizer prices have risen enormously in recent years.
In the past year, diammonium phosphate, commonly used as a corn
fertilizer, rose from under $300 last year to $792 per ton February
15.
Moreover, as fuel prices rise, demand for biofuel also rises.
As a result, more corn, soybeans, and other feedstock crops are
diverted into biofuel production. This exacerbates shortfalls
in the human food system and increases the cost of feeding livestock
and poultry, pushing up meat, egg, and dairy consumer prices.
The US government has pressed for the replacement of 15 percent
of gasoline consumption with ethanol and other biofuels in the
next few years. According to the USDA, this mandate will consume
at least a third of the nation’s corn crop. And with an incentive
to grow biofuel-destined crops, agricultural operations have less
cropland for growing staple food grains. The drive to produce
ethanol has contributed to a doubling in the price of corn in
two years, and a significant drop in global corn reserves.
In a report released February 18, the European bank UniCredit
projected an average $15 per-bushel for wheat in 2009, based on
the trends in land allocation for ethanol crops and in increasing
demand for meats in Asia. “Rising global population, the
production of biofuels and more protein-rich nutrition in emerging
markets are triggering a steady increase in demand,” the
report said, noting that acreage devoted to wheat has been stagnating
for three decades.
None of these problems can find resolution in capitalist market
policies or management on a merely national basis.
Several governments, nervous over increasing prospects of social
unrest, have reported rising inflation rates on food costs. This
week, China announced a record 7.1 percent annual inflation rate
for January, saying that severe winter storms had exacerbated
the country’s already strained food system, pushing food
prices 18 percent higher than one year ago.
Chinese households, many millions profoundly poor, spend about
half of their income on food. Faced with riots over cooking oil
shortages and high staple food costs last year, the government
implemented restrictions on exports and lowered import tariffs
in an effort to lesson the crisis.
On February 21, the Indian government made a public announcement
of a crackdown on grain hoarding among wheat traders, who regularly
withhold stocks until lean months to sell at exorbitant prices.
The national government estimates that India’s 2008 wheat
crop will be slightly lower than that of 2007, while import prices
rise. The country also faces inflation of 4 to 6 percent and widespread
under-nutrition.
Corruption is rampant among grain distributors in areas suffering
scarcity. South Africa has seen a 200 percent increase in wheat
prices in the past year, partly attributable to pervasive price-fixing
among the bread and dairy sectors. On February 19, the country’s
agriculture ministry called for a campaign against industry collusion,
which it said was threatening the country with food insecurity.
Behind these government crackdowns is concern over destabilization
and the risk of popular revolt.
The political consequences of rising food prices are not limited
to net import countries. In the US, food inflation has averaged
4.9 percent over the past year, with a 0.7 percent increase in
January alone. Along with record grain prices have come large
jumps in retail meat, eggs, and dairy prices. Milk in January
was 26 percent higher than a year ago, according to the latest
Labor Department report.
Link to original source
Speculate to accumulate
May 08 - Serge Halimi, Le Monde Diplomatique
The International Monetary Fund and the World Trade Organisation
promised that more trade would help to eradicate poverty and hunger.
Foodcrops? Self-sufficiency in food? They had a better idea. Local
farms would be closed down or encouraged to concentrate on exports.
This would make the most, not of natural conditions which might be good
for growing tomatoes in Mexico or pineapples in the Philippines, but of
the fact that production costs are lower in Mexico and the Philippines
than they are in Florida or California.
Farmers in Mali would rely on more highly mechanised, more
productive producers in the Beauce or the Midwest for grain supplies.
The farmers would pack up, move into town and get jobs in some western
firm that had relocated to take advantage of cheaper labour than it
could find at home. The countries on the East African seaboard would
lighten their load of foreign debt by selling their fishing rights to
the factory ships of wealthier countries. The Guineans would import
tinned fish from Denmark or Portugal. Never mind the additional
pollution generated by transporting all these goods. A life of bliss
was guaranteed and so were the profits of the middlemen – wholesalers,
shippers, insurers, advertisers.
The World Bank, prime promoter of this “development” model, now
tells us that there may be food riots in 33 countries. And the WTO
fears a resurgence of protectionism: some food-exporting countries –
India, Vietnam, Egypt, Kazakhstan – have decided to reduce exports in
order to feed their own people. What a nerve! The North is easily upset
by other people’s selfishness. The Chinese eat too much meat, that’s
why the Egyptians are short of wheat.
Some states have followed the World Bank and IMF advice and turned
over their food crops. They can no longer keep their produce for
themselves. Well, they will pay, that’s the law of the market.
According to UN Food and Agriculture Organisation figures, their bill
for grain imports has risen by a massive 56% in one year. Naturally the
World Food Programme (WFP), which feeds 73 million people in
78 countries every year, is asking for a further $500m.
Someone must have decided this was excessive, as it got only half
that amount. But the sum it sought was only what the war in Iraq costs
every couple of hours, and a tiny fraction of what the sub-prime
mortgage crisis will cost the banking sector, which has been bailed out
by the state. To look at it another way, the WFP asked on behalf of
millions of starving people for 13.5% of the sum earned last year by
John Paulson, the astute hedge fund manager who realised that thousands
of Americans are in negative equity and face ruin. No one knows how
much the incipient famine will yield or who will reap the profits, but
nothing is ever lost in a modern economy.
History repeats itself, one speculation after another. The Federal
Reserve’s monetary policy encourages debt, first the internet bubble,
now the real estate bubble. In 2006 the IMF was still saying there was
“every indication the mechanisms for granting loans on the US property
market were still relatively effective”. Market effective. Perhaps the
two words should be welded together once and for all. The real estate
bubble has burst. So the speculators are resurrecting an old eldorado:
the grain markets. Purchasing contracts to deliver wheat or rice at a
future date and counting on selling them at a higher price. And what
ensures prices will keep on rising? Famine.
So what does the IMF do? The IMF, which has “the best economists in
the world” according to its managing director, explains that “one way
to solve the problem of famine is to increase international trade”. The
poet Leo Ferré once said that “all you need to sell despair is the
right formula”. It looks as though they’ve found it.
Link to original source
Food prices spiral on speculation, export curbs
5th May 08 - Fintan Ng and Yeow Pooi Ling, Malaysia Star Online
The rise in food prices is attributed largely to rising crude oil
prices. However, the expansion of biofuel production as a result of
higher crude prices has also fuelled speculation on food prices in the
commodity markets. StarBiz looks at the complexities of the problem and
how it has affected local consumption.
IS the proverbial third horseman of the apocalypse here? With riots
and political instability due to higher prices of staple foods in the
poorer parts of the world bringing to mind impending starvation, one
will certainly think so.
Traditionally depicted as carrying
scales and riding a black horse, the third horseman represented famine,
drought and mass starvation in popular literature.
Yes, there
have been droughts and following that, famine and mass starvation
before. In recent times, Ethiopia, Somalia and Sudan come to mind.
However,
it is not scarcity due to failed harvests in various parts of the world
that is driving food prices up. After all, agricultural technology has
increased crop yields, the developed world's agro-businesses have
economies of scale while fairly reliable transportation and
distribution links ensure that food usually gets to where it is needed
most.
In fact, Bangladesh, Indonesia and Vietnam have announced recently that they expected bumper rice crops this year.
In
China, the government has said taming inflation is its top priority,
especially food prices that have gone up due to shortages of meat,
grain and cooking oil. Prime Minister Wen Jiabao revealed in March that
the country's grain reserves totalled between 150 million and 200
million tonnes, equivalent to between 30% and 40% of annual production.
China also produces 90% of the grain it consumes and its export of rice makes up 4% of the world's rice exports.
So, what has caused the price of food to rise so steeply, besides the oft-cited higher price of oil?
Speculation and profiteering
According
to the Socialist members of the European Parliament who debated the
issue in late April, speculation in the futures markets for soft
commodities and profiteering are to blame, apart from demand from China
and India.
It might be too easy to blame just speculation and
profiteering for the world's food woes. Speculation on the oil and gold
futures markets does offer a precedent for the current situation in
which investors have been ramping up the prices of both commodities on
fears of future disruptions.
Countries that are not
self-sufficient in food production are also facing another problem:
export curbs, which are also fuelling speculation and hoarding.
On
April 24, the price of rice rose above US$25 per 100 pounds on the
Chicago Board of Trade for the first time following a statement by
Brazil's agriculture minister a day earlier that the country might
restrict rice exports to build domestic inventories due to tightening
international supplies.
The price of rice has more than doubled from a year ago.
This was despite an official at China's state grains trader, COFCO Co Ltd, telling Reuters that the country would continue to export rice.
Vietnam,
the second-largest exporter of rice, has also announced export curbs
while India, another rice exporter, imposed curbs last year to protect
domestic supplies.
Thailand's 100% B-grade white rice, the
industry benchmark for global trade, was quoted at US$894 per tonne on
April 23, according to the Bangkok-based Thai Rice Exporters
Association website. I00% B-grade white rice had risen above US$1,000
two weeks ago due to a Filipino tender two weeks ago. Thailand is the
largest exporter of rice while the Philippines is the largest importer
of rice.
According to the same report, China's rice exports rose
7% to 1.32 million tonnes last year, equal to only about 1% of its
production, which rose 2% to 186.5 million tonnes. This year, shipments
of rice climbed 39% in the first quarter to over 600,000 tonnes.
Challenge to poverty eradication
Many
factors influence the rise in food prices. According to the Non-Aligned
Movement News Network (NNN), food prices have been going up since 2002
but accelerated only in the past few years with the price of grain
going up 42% last year alone.
Besides market speculation,
natural disasters, a growing demand for food worldwide and surging oil
prices, the NNN listed the expansion of biofuel production as one of
the reasons for the rise in the price of food.
Higher food
prices also threaten poverty reduction efforts, hence the concern that
has been shown by world bodies such as the United Nations, its
affiliated agencies, and the World Bank over the past months.
World Bank president Robert Zoellick said in an April 9 policy note titled Rising Food Prices: Policy Options and World Bank Response
that high food prices were offsetting recent gains in overcoming
poverty and malnutrition and was likely to persist over the medium term.
The
World Bank said increases in global wheat prices reached 181% over the
36 months to February this year while overall global food prices rose
by 83%.
“Food crop prices are expected to remain high in 2008
and 2009 and then begin to decline, but they are likely to remain well
above the 2004 levels through 2015 for most food crops,” it said.
Zoellick
had, prior to the report coming out, called for a New Deal for Global
Food Policy focusing not only on hunger and malnutrition, access to
food and its supply, but also on the interconnections with energy, crop
yields, climate change, investment, and the marginalisation of women.
Link to original source
Rice Isn't Oil, Even If Some Asians Think It Is: William Pesek
7th May 08 - William Pesek, Bloomberg
Until last week, the next oil -- the
critical resource growing ever scarcer and prompting desperate
behavior to ensure supplies -- was water. Turns out, it's rice.
That's at least what some Asian leaders think. Hence a plan
in Southeast Asia to create an OPEC-like cartel to manage rice
supplies amid record prices. Thailand and Vietnam account for
almost half of global rice exports. Add in Cambodia, Laos and
Myanmar and Asia's cartel would wield even more power over food
prices than OPEC does with oil.
It's a terrible idea. For one thing, an Organization of Rice
Exporting Countries, or OREC, would presumably favor high prices.
That may benefit producers, but hurt consumers everywhere. For
another, the timing is awful with commodity prices reaching
unprecedented levels.
Haruhiko Kuroda, president of the Asian Development Bank in
Manila, says "the agriculture market should be market-driven''
and that "any kind of cartel isn't good for the exporters and
the importers.'' Philippines Senator Edgardo Angara says it would "create an oligopoly and it's against humanity.''
It's hard to see how a rice cartel would even work. With
oil, you have reserves -- actual stockpiles of the commodity.
Rice needs to be harvested. Its production is dependent on
weather, the cost of fertilizer and the availability of arable
land and water. And how exactly can you control farmers growing
rice or not growing it?
Move Over OPEC
Asia's disparate economies also aren't renowned for
cooperation. Among Mekong Delta nations you have a constitutional
monarchy, an immature multiparty democracy, two communist states
and a military regime -- all at very different levels of
development. Seriously, folks, good luck making that work.
The real story here is this: The very idea of a rice cartel
speaks to the desperation with which Asia is treating food-price
trends.
Food security hijacked recent meetings of the ADB and
Association of Southeast Asian Nations, or Asean. At the ADB
event in Madrid, there was vague, yet worrisome talk of 1997-like
crises in certain Asian nations. Not a regional meltdown that
sends contagion across the globe, but scattered ones.
One sign of the anxiety coursing through Asia is talk in
India of suspending trading in more food futures as political
pressure grows. India has already halted trading in wheat, rice
and lentils. Now there's pressure to ban dealing in cooking oil,
sugar and other commodities.
Trading Ban
The idea of banning commodities trading sounds farfetched.
Markets play an important role in valuing goods and
redistributing them. Yet speculation in everything from oil to
gold to food is causing froth in prices. There's a speculative
bubble in speculation.
It says something about the crazy market environment we're
living in when George Soros leaps out of retirement to get in on
it. Good timing, too: Soros earned an estimated $2.9 billion last
year, according to Institutional Investor's Alpha Magazine.
``If rightly or wrongly people perceive that commodities-
futures trading is contributing to a speculation-driven rise in
prices, then in a democracy you will have to heed that voice,''
Indian Finance Minister Palaniappan Chidambaram told Bloomberg on
May 4.
It makes you wonder why exchanges don't start demanding that
buyers take delivery of the commodities they trade. The bottom
line is that Wall Street doesn't realize the effect that food
prices are having on the developing world.
Food Crisis
Talk of trading bans is enough to send chills down the
spines of disciples of Milton Friedman. Then again, one could
argue that those who believe oil prices are set by the market are
delusional. OPEC ultimately controls the value of oil -- not
traders.
Asia is especially vulnerable to rising food costs. It's
home to the bulk of the world's population and families living in
poverty. Many of the most promising markets are also there.
Global food prices surged 57 percent in March from a year
earlier, according to the United Nations. ADB officials estimate
food expenditure accounts for 60 percent of household outlays for
poor families -- 75 percent when fuel costs are added.
It isn't hard to see why Asia is considering drastic
measures. To many in the region, creating a rice cartel seems no
more irrational than the Federal Reserve saving Bear Stearns Cos.
from collapse. Yet OPEC's influence is a cautionary tale.
Cartel Won't Help
U.S. President George W. Bush in January traveled through
the Persian Gulf begging for an increase in oil production to
give U.S. consumers a break. Bush's pleas fell on deaf ears.
On the campaign trail, Hillary Clinton has ratcheted up the
rhetoric on OPEC. While the summertime gas-tax holiday proposed
by U.S. presidential candidates Clinton and John McCain is just
plain stupid, she's right to question the world's most-watched
cartel.
``They can no longer be a cartel, a monopoly that get
together once every couple of months in some conference room in
some plush place in the world and decide how much oil they're
going to produce and what price they're going to put it at,'' she
said in Indiana this week.
Given how global markets are held hostage by OPEC, a rice
cartel hardly seems like a wise move.
William Pesek is a Bloomberg News columnist. The opinions
expressed are his own.
Link to original source
WTO Think: Bush Commodities Commission Claims `No Speculation in Food Crisis'
22nd April 08 - Press release, Executive Intelligence Review
U.S.
farmers are starting to see the dark side of the bubble in their
products' prices—cash margin calls that can run into the many tens of
millions of dollars for a single farm cooperative—but the Bush
Administration today told them not to worry, there is no speculation in
food!
The
Commodity Futures Trading Commission (CFTC) held a day-long, packed
hearing in Washington today to let farm groups blow off some steam
about wild hedge fund speculation in agro-futures markets (wheat, corn,
hogs bellies, etc). But the CFTC and Agriculture Department chief
economists' testimony claimed that only free trade supply and demand,
not futures and derivatives speculation, was driving the food price
spiral.
The
CFTC was sending a signal that the Cheney-Bush White House, rather than
take regulatory action, would let food commodity markets break down and
stop functioning entirely, amidst the global financial disintegration.
Everyone
involved in commodities markets—including the farm producer groups at
the CFTC hearing—knows that since the global financial markets crashed
last Summer, huge flows of speculative capital managed by hedge funds
have flooded the markets for food and metals futures, overwhelming
those relatively small markets. The futures price of rice has doubled
in two months, for example; futures prices for grains as a whole have
doubled since last July.
Very
bad for eaters—good for farmers? Not now: They are losing the ability
to tell what the price of their produce is. The grain or rice elevator
companies through which farmers have sold their produce for
generations, are refusing to make future purchases because of the
unprecedented volatility of prices, and because the elevators depend on
credit which banks are refusing to extend. Several such "country
elevators," as they are called, have shut down in the past few months.
Farm
producers are increasingly being forced to wait for harvest and make a
cash sale to food marketing conglomerates like ADM or Cargill. There is
no other recourse. And that cash sale price often has no relation to
the "futures price" for that month which the farmers looked up on the
Chicago Board of Trade or other futures market.
When
the farm co-ops try to "hedge" that problem by buying their own futures
and options—rather than through the elevator operators—they start to
get stiff margin calls, demanding cash, when the prices of their
product jump up. Essentially, they wind up buying their own crops at
higher prices than they will be able to sell them!
Metals
industry sources say that exactly the same thing is happening on their
futures markets, where international demand is clearly not rising in a world economic depression.
In the food market crisis, City of London mouthpieces like the Economist and Financial Times
have been fiercely denouncing those nations which have gone for
national food self-sufficiency, controlling exports and regulating
prices. But that's the direction the U.S. Congress will have to go,
overruling the White House free-trade lunatics.
Link to original source
Food price jump blamed on speculation
28th April, Associated Press
U.N. officials on Monday blamed market speculation for the recent
jump in global food prices and called for a concerted effort to ensure
that the world's poor can afford to eat.
"We have enough food on
this planet today to feed everyone," the head of the U.N. Environment
Program, Achim Steiner, told The Associated Press in a telephone
interview.
But "the way that markets and supplies are currently
being influenced by perceptions of future markets is distorting access
to that food."
"Real people and real lives are being affected by
a dimension that is essentially speculative," said Steiner, noting that
millions have found themselves unable to pay for food since prices
began to rise steeply at the start of the year.
Last week, the
World Food Program asked for an additional $755 million to fill the
hole in its budget caused by rising prices and growing reliance on food
aid among the world's poor.
Steiner's comments were echoed by the U.N.'s right-to-food advocate, who said high food prices are destabilizing the world.
Jean
Ziegler told reporters at the U.N.'s European headquarters in Geneva on
Monday that the "daily massacre of hunger" was being worsened by
private equity companies seeking to profit from price swings on the
international commodities markets.
A U.S. government regulator
last week rejected the idea that speculative trading is the primary
culprit behind surging prices of corn, wheat and other crops.
Bart
Chilton, a commissioner with the U.S. Commodity Futures Trading
Commission, said commodities markets were functioning properly, and
that shrunken harvests, smaller grain inventories and the declining
value of the dollar were the reason for the all-time price highs.
But over the weekend Vietnam moved to curtail speculative buying of rice after consumers were panicked into buying up stocks.
State
media quoted Prime Minister Nguyen Tan Dung on Sunday as insisting that
supplies in Vietnam -- the world's second-largest rice exporter after
Thailand -- were "completely adequate" for domestic consumption. But
Dung warned that any organizations and individuals speculating in the
commodity would be "severely punished."
U.N. Secretary-General
Ban Ki-moon has called the heads of all the global body's major
agencies for a meeting this week in the Swiss capital, Bern, to discuss
the food crisis. Other senior figures including World Bank President
Robert Zoellick and the director-general of the World Trade
Organization, Pascal Lamy, are also attending the closed-door gathering.
Steiner said underlying problems in global food production needed to be addressed.
Governments
should resist giving in to panic about short-term price increases, he
said, and instead consider medium- and long-term solutions to the
problem of feeding a world population already numbering some 6.5
billion and expected to hit 9 billion by 2050.
"What we would
clearly not welcome is a simple ratcheting up of the production machine
without any consideration of the consequences," said Steiner.
The
U.N. Environment Program estimates that 70-80 percent of the world's
water consumption goes toward agriculture, yet 40-60 percent of that
water never actually reaches the fields.
Likewise, over-reliance
on fertilizers boosts production in the short term but depletes the
soil in the long run, according to UNEP.
"Sustainable agriculture will cost us a little bit more but will actually allow us to feed a lot more people," said Steiner.
He
said market corrections will eventually cause the speculation bubble to
burst, but governments should consider the current situation a warning
of what might come unless farming and consumption patterns are changed.
"The
footprint of a Western consumer today on the planet is simply many
times that of a person living in a developing country," said Steiner.
"We
need to think in medium- to long-term responses, but not forgetting
that we have a real situation right now with tens of millions of people
essentially being priced out of feeding themselves."
Link to original source
UN's Food Rights Advocate Warns Speculators
3rd May 08 - Haider Rizvi, Oneworld
The global food crisis is likely to persist if speculative investment
by the corporate world is not reined in soon, warned a top expert
responsible for reporting to the United Nations on human rights
violations.
"They are important actors in the current crisis. They are the
pricemakers," said Olivier De Schutter of the world's major investors
in food markets. "I ask them to act responsibly."
The newly appointed UN rapporteur on the right to food told a news
conference here Friday that currently many major investment firms were
heavily investing in food commodities, such as corn, wheat, and cattle.
"This is not a natural disaster. It's not an earthquake," he said.
"This is a man-made crisis, and we know its causes on which we we must
act."
De Schutter, a Belgian national who teaches law at the University
of Louvain and the College of Europe, emphasized in a statement that
those involved in causing skyrocketing food prices do not actively
intend to violate human rights. But failure to act to protect hungry
people should be seen as a rights violation, he added.
De Schutter urged governments to act quickly against such trends
to prevent further escalation in the current food crisis. "Governments
may not remain passive in the current crisis," he said. "Passivity
would constitute a violation of the right to food by neglect."
According to the United Nations, the right to food is a human right. It
was recognized in a resolution adopted by the UN Human Rights Council
(previously known as the Human Rights Commission) in April 2000. The
resolution says the problems of hunger and food insecurity "have global
dimensions and...are likely to persist and even to increase
dramatically in some regions, unless urgent, determined, and concerted
action is taken."
De Schutter said he intended to raise the issue of the current
food crisis and its causes at the upcoming meeting of the Human Rights
Council due to take place May 22. He said he hoped the 47-member rights
body would heed his calls for the member states to take practical
actions to ensure access to food for all.
The special rapporteur agrees with independent researchers that
international trade imbalances between the rich countries of the
industrialized North and the poorer agriculture-based societies in the
South are also a major factor, in addition to phenomenal growth in
population.
"The subsidies (in the agriculture sector) in the developed countries are ruining the developing countries' producers," he said.
De Schutter also criticized the developed countries for increased
consumption of food crops as fuel, saying: "You are using food crops
for cars, not people.
According to the UN estimates, currently more than 800 million
people are in a state of food insecurity in the world. Most of them
live in sub-Saharan Africa or in South Asia. It is estimated that the
current increase in global food prices -- by 83 percent over the last
three years -- will lead to at least 100 million more people facing
hunger and starvation.
The current food crisis has unleashed a wave of unrest in about 40
countries that also involved violent clashes with police by protesters.
In pressing the UN Human Rights Council to convene a special
session on the food crisis, De Schutter said the right to adequate food
had been "for the moment totally absent" from the debate about economic
and humanitarian aid to meet the current crisis.
"If we had 100 million persons arrested in a dictatorial regime
[or] if we had 100 million persons beaten up by police, of course we
would be marching on the streets and we'd be convening special sessions
of the Council," De Schutter said. "Every single one of these 100
million individuals deserves the same degree of attention from the
international community as if the person had been arbitrarily arrested
or detained for his or her political opinions."
Earlier this week, UN chief Ban Ki-moon formed an international
task force to prepare a global plan of action to tackle the rise in
food prices.
Link to original source
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