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Forum Post: The Great Hunger Lottery-Food Speculation Report

Posted 7 years ago on Dec. 11, 2011, 8:46 p.m. EST by GirlFriday (17435)
This content is user submitted and not an official statement

The Great Hunger Lottery - How banking speculation causes food crises

In The Great Hunger Lottery, the World Development Movement has compiled extensive evidence establishing the role of food commodity derivatives in destabilising and driving up food prices around the world. This in turn, has led to food prices becoming unaffordable for low-income families around the world, particularly in developing countries highly reliant on food imports. Nowhere was this more clearly seen than during the astonishing surge in staple food prices over the course of 2007-2008, when millions went hungry and food riots swept major cities around the world. The great hunger lottery shows how this alarming episode was fueled by the behaviour of financial speculators, and describes the terrible immediate impacts on vulnerable families around the world, as well as the long term damage to the fight against global poverty. In the report we describe how the current situation came to pass, the risks of another speculation induced food crisis, and what specifically can be done by policymakers here in the UK as well as in the US and EU to tackle the problem. http://www.wdm.org.uk/food-speculation/great-hunger-lottery


Great read!

27 Comments

27 Comments


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[-] 1 points by ZenDogTroll (13032) from South Burlington, VT 7 years ago

I've also read that in developing countries the practice has been to sell imports of grain really cheap - things they are already producing

with the result that local farmers can't compete, and so go out of business.

Once the local farmers are out of business, then the speculators drive the prices back up.

I wish I had a link on that - those who devised and implemented such a plan should be shot.

[-] 1 points by JamesS89118 (646) from Las Vegas, NV 7 years ago

That's old school Capitalism from the '50s.

Check out 'Confessions of an Economic Hit Man' by John Perkins. He claims he was interviewed by the NSA to sell generators to 3rd world countries with loans from the IMF forever trapping that country in debt.

Some say it's bs, but it reads pretty true to my eyes and ears.

http://www.amazon.com/gp/product/0452287081?ie=UTF8&tag=lewrockwell&linkCode=xm2&camp=1789&creativeASIN=0452287081

[+] -6 points by GirlFriday (17435) 7 years ago

Not just grain, either.

I agree. When do we say, hey............looks like low grade genocide.

[-] 1 points by JamesS89118 (646) from Las Vegas, NV 7 years ago

If it sells like genocide, costs like genocide and profits like genocide then by all means let's genocide!!!

[+] -6 points by GirlFriday (17435) 7 years ago

Really?

[-] 1 points by JamesS89118 (646) from Las Vegas, NV 7 years ago

Well, no not really lol! Obviously, lol!

[-] 1 points by ZenDogTroll (13032) from South Burlington, VT 7 years ago

I don't know if it's a deliberate attempt to kill people or not - but those engaged in the process should be rounded up, tried, and then shot.

[+] -6 points by GirlFriday (17435) 7 years ago

How is it not intentional?

Just because the bitches wear suits does NOT make them more morally evolved.

[-] 1 points by ZenDogTroll (13032) from South Burlington, VT 7 years ago

It goes to motive.

it's like the difference between first and second degree murder - is the intent to make money or create a new cheap labor pool? or is the intent simply to kill people.

There is a difference between a process that has, as a consequence, the deaths of others, and a process where the deaths of others is a principle goal.

[+] -6 points by DKAtoday (33800) from Coon Rapids, MN 7 years ago

I think it should also be looked at in the way of - could the resulting deaths have been foreseen prior to initiating? Were they foreseen? Was this an obvious and expected consequence?

Indifference is not a defense. Claimed ignorance is not a defense.

[-] 1 points by ZenDogTroll (13032) from South Burlington, VT 7 years ago

I think those involved should be made an example of - regardless of what they were thinking.

[+] -6 points by DKAtoday (33800) from Coon Rapids, MN 7 years ago

They say ignorance is no excuse.

Well these are supposed to be highly intelligent, highly educated people.

So yeah they should be made an example of.

[+] -6 points by GirlFriday (17435) 7 years ago

Pbbbttttt... They know exactly what they are doing. There is no justification for this.

Just under three years ago, people in the village of Gumbi in western Malawi went unexpectedly hungry. Not like Europeans do if they miss a meal or two, but that deep, gnawing hunger that prevents sleep and dulls the senses when there has been no food for weeks.

Oddly, there had been no drought, the usual cause of malnutrition and hunger in southern Africa, and there was plenty of food in the markets. For no obvious reason the price of staple foods such as maize and rice nearly doubled in a few months. Unusually, too, there was no evidence that the local merchants were hoarding food. It was the same story in 100 other developing countries. There were food riots in more than 20 countries and governments had to ban food exports and subsidise staples heavily.

The explanation offered by the UN and food experts was that a "perfect storm" of natural and human factors had combined to hyper-inflate prices. US farmers, UN agencies said, had taken millions of acres of land out of production to grow biofuels for vehicles, oil and fertiliser prices had risen steeply, the Chinese were shifting to meat-eating from a vegetarian diet, and climate-change linked droughts were affecting major crop-growing areas. The UN said that an extra 75m people became malnourished because of the price rises.

But a new theory is emerging among traders and economists. The same banks, hedge funds and financiers whose speculation on the global money markets caused the sub-prime mortgage crisis are thought to be causing food prices to yo-yo and inflate. The charge against them is that by taking advantage of the deregulation of global commodity markets they are making billions from speculating on food and causing misery around the world.

As food prices soar again to beyond 2008 levels, it becomes clear that everyone is now being affected. Food prices are now rising by up to 10% a year in Britain and Europe. What is more, says the UN, prices can be expected to rise at least 40% in the next decade.

There has always been modest, even welcome, speculation in food prices and it traditionally worked like this. Farmer X protected himself against climatic or other risks by "hedging", or agreeing to sell his crop in advance of the harvest to Trader Y. This guaranteed him a price, and allowed him to plan ahead and invest further, and it allowed Trader Y to profit, too. In a bad year, Farmer X got a good return but in a good year Trader Y did better.

When this process of "hedging" was tightly regulated, it worked well enough. The price of real food on the real world market was still set by the real forces of supply and demand.

But all that changed in the mid-1990s. Then, following heavy lobbying by banks, hedge funds and free market politicians in the US and Britain, the regulations on commodity markets were steadily abolished. Contracts to buy and sell foods were turned into "derivatives" that could be bought and sold among traders who had nothing to do with agriculture. In effect a new, unreal market in "food speculation" was born. Cocoa, fruit juices, sugar, staples, meat and coffee are all now global commodities, along with oil, gold and metals. Then in 2006 came the US sub-prime disaster and banks and traders stampeded to move billions of dollars in pension funds and equities into safe commodities, and especially foods.

"We first became aware of this [food speculation] in 2006. It didn't seem like a big factor then. But in 2007/8 it really spiked up," said Mike Masters, fund manager at Masters Capital Management, who testified to the US Senate in 2008 that speculation was driving up global food prices. "When you looked at the flows there was strong evidence. I know a lot of traders and they confirmed what was happening. Most of the business is now speculation – I would say 70-80%."

Masters says the markets are now heavily distorted by investment banks: "Let's say news comes about bad crops and rain somewhere. Normally the price would rise about $1 [a bushel]. [But] when you have a 70-80% speculative market it goes up $2-3 to account for the extra costs. It adds to the volatility. It will end badly as all Wall Street fads do. It's going to blow up."

The speculative food market is truly vast, agrees Hilda Ochoa-Brillembourg, president of the Strategic Investment Group in New York. She estimates speculative demand for commodity futures has increased since 2008 by 40-80% in agricultural futures.

But the speculation is not just in staple foods. Last year, London hedge fund Armajaro bought 240,000 tonnes, or more than 7%, of the world's stocks of cocoa beans, helping to drive chocolate to its highest price in 33 years. Meanwhile, the price of coffee shot up 20% in just three days as a direct result of hedge funds betting on the price of coffee falling.

Olivier de Schutter, UN rapporteur on the right to food, is in no doubt that speculators are behind the surging prices. "Prices of wheat, maize and rice have increased very significantly but this is not linked to low stock levels or harvests, but rather to traders reacting to information and speculating on the markets," he says.

"People die from hunger while the banks make a killing from betting on food," says Deborah Doane, director of the World Development Movement in London.

The UN Food and Agriculture Organisation remains diplomatically non-committal,saying, in June, that: "Apart from actual changes in supply and demand of some commodities, the upward swing might also have been amplified by speculation in organised future markets."

The UN is backed by Ann Berg, one of the world's most experienced futures traders. She argues that differentiating between commodities futures markets and commodity-related investments in agriculture is impossible.

"There is no way of knowing exactly [what is happening]. We had the housing bubble and the credit default. The commodities market is another lucrative playing field [where] traders take a fee. It's a sensitive issue. [Some] countries buy direct from the markets. As a friend of mine says: 'What for a poor man is a crust, for a rich man is a securitised asset class.'" http://www.guardian.co.uk/global-development/2011/jan/23/food-speculation-banks-hunger-poverty


There is no excuse.

[-] 1 points by ZenDogTroll (13032) from South Burlington, VT 7 years ago

There is no excuse.

I do not argue that point in the least.

It really pisses me off.

[+] -6 points by GirlFriday (17435) 7 years ago

Me, too.

[-] 1 points by ZenDogTroll (13032) from South Burlington, VT 7 years ago

I can see that - and I don't blame you

[-] 1 points by Nevada1 (5843) 7 years ago

Good post. Goldman Sachs is a big contributor to this problem.

[-] 0 points by JamesS89118 (646) from Las Vegas, NV 7 years ago

I'm about ten stamps away from a gun and a bank, myself.

[+] -6 points by GirlFriday (17435) 7 years ago

Oh, you can't rob a bank unless it is white collar crime and then you can just walk away free to steal moar.

[-] 1 points by JamesS89118 (646) from Las Vegas, NV 7 years ago

Well, I do have a degree in econ, but the first thing I did with it was realize I needed to be on SSDI.

If I did ever rob a bank though it would be with a pen :) And I'd keep the cap on just to be safe lol hehehe

[Removed]

[-] -2 points by GreedKilIs (29) 7 years ago

Why don't you get off your 380 pound wheel chair bound ass and stop eating until the citizens have to pay for you another pair of knees? Then maybe you can plant some vegetables for your starving neighbors?

[+] -6 points by GirlFriday (17435) 7 years ago

The best part about you is that you're both idiotic and monstrously hideous. That's probably why nobody likes you.

[-] -2 points by Censored (138) 7 years ago

What an idiotic post. Hunger is caused by population growth, poor governance, and conflict. If you want to chuck something else on the pile, it's also access to technology and water. Then, of course, there's ethanol where we convert food to fuel. You know, dear, that ethanol consumes about 1/3 of the U.S. corn crop, don't you?

Smarten up. If "speculators" drive up prices by buying food, THEY END UP WITH THE FOOD. Where the hell do you think that food is going? If they're buying, they're also SELLING. Either that or they're dumping it in the ocean somewhere. Honest to God, smarten up.

[+] -6 points by GirlFriday (17435) 7 years ago

:D I have a great post!!!

[-] -3 points by GreedKilIs (29) 7 years ago

Why don't you get off that sorry ever widening triple load ass of yours and plant some vegetables for your starving neighbors? Try washing a load of panties too as I've heard you are much like my favorite hockey player and only change underwear after three periods.

[+] -4 points by GirlFriday (17435) 7 years ago

Yes.

[+] -4 points by GirlFriday (17435) 7 years ago

Really great.