The UN FAO should come out firmly against speculation
Date: 24 September 2010
The World Development Movement believes that a key reason that food prices rises have been increasing dramatically is due to excessive speculation in commodity markets by investment banks and hedge funds and that the UN FAO should be coming out more strongly against excessive speculation.
Dr Julian Oram, who is attending the UN FAO emergency summit in Rome commented:
“There is a clear narrative emerging from the meeting of, ”crisis? what crisis?’ Looking at the numbers we’re not facing an imminent food shortage, such as we saw in 2007-08. What’s interesting is that the current jump in grain prices seems to be driven by markets, not supply and demand. There’s a strong view that we’re witnessing a speculation-induced food price spike.
“We’ve heard some concrete ideas at today’s sessions to reign in excessive speculation on commodity markets, and it’s encouraging to hear more and more governments falling in line behind these proposals.”
“Food experts are telling us that global grain stocks are fine and there’s no imminent shortage. The recent price movements we’ve seen can only be explained by opportunistic speculators snapping up food derivatives contracts, in order to make a quick buck. This kind of activity benefits no one, and it’s up to the UK and other governments to crack down on predatory speculation by banks and hedge funds.
“The FAO should come out firmly against speculation. They know it’s a problem, and we hope they will back the action necessary to curb excessive speculation by the banks and return commodity markets into the hands of the world’s legitimate food producers and consumers.
“The World Development Movement agrees that although poor harvests, increased demand for biofuels and increased consumption may be the initial trigger that causes gradual, long term price rises in food, the blame lies squarely with the City. Hedge funds and big investment banks like Goldman Sachs make the situation much worse through speculation that causes sudden massive rises and falls in the prices of staple foods.”
A new financial reform law was passed in the USA this summer which will help to prevent this kind of damaging speculation. But here campaigners are worried that the UK government could move to block similar reforms proposed in Europe because of the strong banking lobby in London and Brussels that lobbies hard against regulation.
The World Development Movement warns that unless urgent steps are taken by the government to clamp down on the banks, prices could get out of control, as warned by the UN this week. This is likely to also drive up inflation in food prices in Britain, leaving people on low-incomes out of pocket. More alarming is that price rises could cause hunger and spark further civil unrest in poorer countries, such as the food riots already seen this year in Mozambique, and Haiti, Mexico and Bangladesh in 2008, when world wheat and maize prices reached unprecedented highs.
