Aug 16, 2010
Suddenly, wheat prices are skyrocketing again, just like they did in 2008.
Newspapers are full of stories telling us that this price rise is caused by shortages, due to floods in Canada and drought in Russia.
But in fact, there is no shortage. Daniel W. Basse, president of AgResource, an agricultural consultant firm, has said, “This is still going to be the third-largest wheat crop in world history, even with the Russian shortfall.” Wheat stocks in the United States are at a 23-year high.
Nonetheless, wheat prices have risen by 90% since June.
Speculation, not shortage, is the cause.
Agricultural investment funds, controlled by large banks, establish the prices for goods like wheat by how much they buy and sell. One of the first such funds was created in 1991 by Goldman Sachs, and now they’ve multiplied to the point that they dominate the entire agricultural market. A United Nations report estimated that in 2008, fully 80% of the world wheat contracts were controlled by such investment funds. That allows them to drive prices up at the drop of a hat.
Here in the United States, that means that we’ll be paying higher prices for bread and pasta. We saw prices double in 2008, and they never came back down to their earlier levels; now, they’ll rise again – at a time when more and more families can’t afford the slightest price rise.
But in other areas of the world, the effect is catastrophic: skyrocketing prices means outright starvation for millions of people in places like Egypt, Nigeria, or the Philippines.
Firms like Goldman-Sachs will starve millions of people more – only to line their pockets.