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Food Futures Behind Rising Prices

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.

7th May 08 - Anil Netto, IPS News

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.'' 

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Food prices continue to rise worldwide

25th Feb 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.

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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.

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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.

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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.

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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.

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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."

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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. 

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