Speculation, food prices and the poor

Quote

“There are two times in a man's life when he should not speculate: when he can't afford it, and when he can.”  Mark Twain

News
In recent days the prices of many commodities are reaching highs not seen for several years.  The overall commodity food price index has increased by 27% in a year; staple foods have risen even more: wheat by 49%, maize by 53%, sorghum by 33%. 

Poor harvests are partly to blame – droughts in Russia, Ukraine, Argentina and the US have reduced grain supplies, and floods in Canada, Pakistan and now Australia have wiped out a large part of their crops.  Falling global stocks, export bans by Russia and India and rising demand from China have all helped to push prices higher.

However, a more sinister factor is at work: speculation.  Investment banks, pension and hedge fund managers have poured over $200 billion into food futures markets in the past 2 years, with sums speculated at record highs.  These markets were established to reduce risks to farmers and consumers by dampening price fluctuations, but now foodstuffs have become financial and speculative assets, traded without regard to the impact on the livelihoods of genuine producers and consumers of the commodities – especially the world’s poor, who spend 30-50% of their daily earnings on food.

Every financial transaction is ultimately relational, because the outcome affects people either positively or negatively.  Ideally every purchase should benefit both buyer and seller; no monetary decision is ever relationally neutral.  Yet the decisions of major financial institutions to invest billions in speculating on food prices shows a complete disregard for the consequences of their actions on the poor.

There is a world of difference between what is legal and what is morally and relationally legitimate.

Read on...

The World Development Movement has produced a report entitled, “The great hunger lottery.”  It examines the impact of food speculation in more detail and recommends the re-regulation of the food futures markets to reduce destabilisation and volatility of prices.  Read the report here.

Walk the talk

Most of us are unwitting participants in food price speculation.  If we have a pension or savings in a bank, part of our money could well be invested in these markets.  Perhaps the most practical thing we can do is be better informed; why not write to your pension fund or bank and simply ask if your money is being invested in food speculation?  The ensuing conversation could be more enlightening than you imagine!

The last word
From the Bible, Proverbs 11:26 “People curse the man who hoards grain, but blessing crowns him who is willing to sell.”