Who Pays the Price of Speculators' Greed?

Saturday, June 14, 2008
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While the world faces one of its worst crisis and millions of people are struggling with starvation and death, analysts point finger at several factors.

Soaring oil prices, high consumption of food products in developing countries including India and China, and unprecedented drought in Australia, one of the major producers of wheat and rice are among factors analysts blame for the hike in food prices.

Although such factors have contributed to the current situation they cannot explain why food prices have been skyrocketing in the past six months.

"We have enough food on this planet today to feed everyone," says the head of the UN Environment Program, Achim Steiner, but "the way that markets and supplies are currently being influenced by perceptions of future markets is distorting access to that food."

"Real people and real lives are being affected by a dimension that is essentially speculative," says Steiner.

According to the UN official millions "have found themselves unable to pay for food" as food prices began to go through the roof since the beginning of 2008.

Now, millions of people across the world are struggling with what Josette Sheeran of the World Food Program (WFP) describes as "a silent tsunami".

Although the issue of food crisis has recently been grabbing headlines, public media have barely scratched the surface of the catastrophic situation. The reason is obvious: in a capitalistic dog-eat-dog world the exchange market must be considered as a source of prosperity and no one should be allowed to cast doubt on its sacredness.

In his article The trading frenzy that sent prices soaringpublished by the Newstatesman, Iain Macwhirter, writes: "The reason for food 'shortages' is speculation in commodity futures following the collapse of the financial derivatives markets. Desperate for quick returns, dealers are taking trillions of dollars out of equities and mortgage bonds and ploughing them into food and raw materials. It's called the 'commodities super-cycle' on Wall Street, and it is likely to cause starvation on an epic scale."

The reality is that hedge funds and speculators have found future food contracts a lucrative field of activity which can be considered as a license to print money.

The injection of these large sums of money into the marked has created artificial demands which have sent food prices soaring; however, this lucrative trade has so far claimed 100 million lives and left many others struggling with poverty and hunger.

The price of wheat is estimated to be increased by 73 percent by the end of 2008. The situation for other food items is not better: the price of soybeans is expected to rise by 54 percent and that of soybeans oil by 49 percent.

Deutsche Bank estimates that the prices of corn, one of the main food sources, would double over a short period of time.

"Just like the boom in house prices, commodity price inflation feeds on itself. The more prices rise, and big profits are made, the more others invest, hoping for big returns. Look at the financial websites: everyone and their mother is piling into commodities. It is the great bull market of the Noughties. The trouble is that if you are one of the 2.8 billion people, almost half the world's population, who live on less than $2 a day, you may pay for these profits with your life.

This speculation doesn't happen on its own, however. Commodities such as gold and oil are favourite "hedges" against falling currencies. But this time all manner of other commodities, such as wheat and rice, have been swept along in the inflationary slipstream," Macwhirter adds.

The issue of future contracts and speculations is not the only contributing factor in the current global crisis; the industrialized world's US-led drive to use food products for developing bio fuels has fanned the flames of famine and hunger across the world.

The developed nations justify their move which UN officials described as "a crime against humanity" by the notion that such fuel resources would cut their dependency on fossil fuels whose resources are mainly located in other parts of the world. The US grants heavy subsidies ($11-12billion) for the production of ethanol corn every year.

At the beginning of a recent FAO summit in Rome, Jacques Diouf, the head the UN organization lashed out at the US over the issue:

"Nobody understands [why] $11-12 billion of subsidies in 2006 and protective tariff policies [should be used to] divert 100 million tons of cereals from human consumption, mostly to satisfy a thirst for fuel for vehicles."

As Indian Finance Minister P. Chidambaram says converting food products to bio fuel is "the most foolish thing" that humanity can do and should be condemned, yet Washington encourages farmers to follow this unwise practice, isn't it surprising?

The painful fact is that we have enough food to feed the world but many people, mainly innocent children, have to die to satisfy "the deadly greed" of speculators and certain politicians.


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