It is deeply alarming that the greatest proportion of activity in the futures markets no longer involves those in the supply chain but is, instead, taken up by speculators. Food commodities are too important to be played about with by day traders and speculators
— President of National Farmers’ Union Scotland
Some time ago I rejected the view that spikes in food and energy prices were entirely due to constrained supply. To be sure, food and crude oil resources are under strain in the early part of the 21st century due to geological limits (for oil) and a changing climate (for food stuffs).
However, another Great Truth of our time is that the global commodity markets are broken, meaning that these markets have become financialized to such an extent that we now have trouble distinguishing between actual resource shortages and the pernicious effects of gambling in those markets. I recently became so disgusted with unjustified price movements that I quit writing about crude oil.
Thus it comes as no surprise when we see articles like Barclays makes £500m betting on food crisis, which appeared in the UK newspaper The Independent on September 1, 2012.
Barclays has made as much as half a billion pounds in two years from speculating on food staples such as wheat and soya, prompting allegations that banks are profiting handsomely from the global food crisis.
Barclays is the UK bank with the greatest involvement in food commodity trading and is one of the three biggest global players, along with the US banking giants Goldman Sachs and Morgan Stanley, research from the World Development Movement points out.
Last week the trading giant Glencore was attacked for describing the global food crisis and price rises as a "good" business opportunity...
Oxfam's private sector adviser, Rob Nash, said: "The food market is becoming a playground for investors rather than a market place for farmers. The trend of big investors betting on food prices is transforming food into a financial asset while exacerbating the risk of price spikes that hit the poor hardest."
The World Development Movement report estimates that Barclays made as much as £529m from its "food speculative activities" in 2010 and 2011. Barclays made up to £340m from food speculation in 2010, as the prices of agricultural commodities such as corn, wheat and soya were rising. The following year, the bank made a smaller sum – of up to £189m – as prices fell, WDM said.
I found the World Development Movement (WDM) report, called The Great Hunger Lottery: How banking speculation causes food crises (pdf). You can look at the WDM website, read the report, and read the rest of that Independent article about Barclays if you want more information about speculation in the food markets. There is also a remarkable article called The Food Bubble: How Wall Street starved millions and got away with it. This piece appeared in July, 2010 issue of Harpers magazine.
There will always be evil, amoral, unprincipled scumbags who seek to make a quick buck off the suffering of others. The Christian Gospels (e.g. here) contain a phrase which is often proverbialized as—
The poor are always with us
Another apt phrase, which is much discussed in the Gospels but does not appear directly therein, could be added to our list of common proverbs.
The scumbags are always with us
Residing at the very core of the Liberal notion of material and moral Progress in human history is the hopeful idea that scumbags can be kept in check—in modern terms, regulated—in order for this alleged Progress to proceed. We now live in a world in which the scumbags are not only with us, but appear to be running the show.
And until such time as some countervailing force—governments?, the people?, God?, aliens?—arises to rein in these ever-present scumbags, prices of the things people depend on for Life Itself (basically, energy of all types) will continue to be high and volatile, in so far as those prices are due to the reckless, amoral machinations of scumbags. Straightforwardly, this unhappy situation results in great suffering and death among the aforementioned poor.
This is our situation in the early decades of the 21st century. We might (and often do) wish the situation were otherwise, but wishful thinking will not fix it.