The Bureau of Investigative Journalism | June 22nd, 2011
by Nick Mathiason
For the first time ever, agriculture ministers from the world’s 20 most powerful countries will this morning meet in an attempt to stamp out agricultural commodity price surges.
Never before has the issue of escalating food prices attracted such high level international concern. It is almost certain political attention will continue to be focused on commodity prices for many decades to come because investment banks, the UN Food and Agriculture Organisation and OECD projections suggest the food spike has not run out of steam.
Sharp food price hikes have increased global inflation, sparked food riots in dozens of developing countries in 2008 and has increased the number of people going hungry in poor nations.
A huge surge of speculative cash from hedge funds, banks and trading companies operating under the cloak of anonymity, is forcing up commodity future prices on global exchanges.
Pricing instability and speculation
The destabilising effect this has on the global economy and people’s lives is clear. Farmers whether they are living in East Anglia or East Kenya find it hard to make long-term business decisions when prices balloon and then burst. Though arable farmers are now benefiting from higher grain prices after decades of decline, all suffer, particularly livestock farmers, from higher transport, fertilizer and feed costs.
The causes of commodity market volatility are clear. Recent Russian and Australian droughts combined with floods in Asia have affected prices. Rising populations and a growing desire from China and India for meat is increasing demand. Rapid urbanisation means fewer people are growing food in the developing world.
But there is another factor that even City traders the Bureau has spoken to, admit accounts for a large chunk of commodity price rises: a huge surge of speculative cash from hedge funds, banks and trading companies operating under the cloak of anonymity is forcing up commodity future prices on global exchanges.
This year, for the first time most of the fish eaten in the world will come from fish farms.
Bureau investigation into commodities
Today as the first ever G-20 agriculture meeting starts in Paris, the Bureau is launching a series of investigations into the role played by financial investors in commodity and food markets.
The Bureau will be focusing on giant trading companies – the true global food powerbrokers – as well as the rising involvement of private equity in buying land around the world and its new food frontier, fish farming. For the first time this year, most of the fish eaten in the world will come from fish farms.
The Bureau last night spoke with the UK’s agriculture minister, James Paice who confessed concern at the lack of transparency and data on global food and commodity markets. But whether his government will introduce new rules to bring about greater transparency will be a true test of the coalition’s determination to deal with an issue that affects us all.
