Food Speculation and Famine

Apr 14, 2008

In Western countries, the increase in prices over the last several months has reduced the living standards of the working class. But in the world’s poorer countries, food price increases have become a horrible social catastrophe.

Between 2006 and 2007, the price of basic foods increased by 27%. Recently, food prices have gone up even faster and higher. The price of wheat has increased more than 120%. Prices for rice, soybeans and corn have not stopped climbing.

There are more than 70 million people starving to death around the globe. The United Nations world food program has asked for another 500 million dollars to provide them some food aid. Since June of 2007, the foods purchased by this organization have increased 55%. Food prices have already risen another 20% since the UN made its request for more aid.

What causes these price increases that throw millions of people living in poor neighborhoods out into the street? Some journalists have the nerve to say that the poor eat too much! They demand too much food, which pushes up the prices, say those who blame the poor. It’s simple! If the poor would just keep starving to death, there would be no problem.

So readers may shake their heads thinking they are reading wrong, when the editors of Le Monde write, "In only a few years, hundreds of millions of people who previously survived on almost nothing have now become big consumers"! Another journalist wrote that in China “people have developed an appetite for meat.” By this logic, the Chinese ate less meat during the previous decades because they lacked an “appetite”!

But the disgusting journalists who blame the poor for the increase in food prices are largely silent about the role played by food speculators. There is already a lot of speculation on agricultural commodities in ordinary times. But during a financial crisis a lot of big capitalists are searching for deals on which they can make profits. Once the price of food commodities began to rise, a lot more capitalists jumped in. For example, in London, from January to February, the number of deals involving basic food items jumped by at least 65% compared to the same period in 2007.

Just as the speculators once bet on rising prices for houses or start-up Internet companies, they now focus more and more on food products. More precisely, they are betting on the pieces of paper, on the “commodity options” that they buy and then resell, forcing a rise in prices. Financial journals have articles about what a remarkable opportunity rice and all basic grains are for investors.

So the speculators have pushed up the price of rice from $420 a ton to $570 over the last six months on the Chicago Mercantile Exchange, and from $330 to $470 a ton on the Bangkok exchange. On one single day in March, the price of rice rose 31%!

This dizzy increase in food prices is a catastrophe with two faces: an abhorrent enrichment for some, and a hideous famine for millions of others.