If you haven't seen it, there's a movement to stop banks gambling on food commodity prices.
It has been created by the World Development Movement, and they describe the campaign as follows:
Banks, hedge funds and pension funds are betting on food prices in financial markets, causing drastic price swings in staple foods such as wheat, maize and soy.
These markets were originally developed for the benefit of those involved in the production of food, yet over the last 10 years they have changed almost beyond recognition. Deregulation has enabled speculators to dominate, causing drastic spikes and crashes in prices.
Effects of rising food prices
Massive food price increases are catastrophic for people in poverty in the global south, who spend most of their income on food. This results in:
- Increased hunger as food becomes unaffordable.
- Malnutrition as smaller quantities of expensive foods such as fruit and vegetables are eaten in order to afford staple foods
- Increased burden on women to earn more money by taking up risky employment such as sex work or domestic work.
- Households using up savings, going into debt or selling assets to pay for food.
- Families unable to afford healthcare and education as more of their income is needed to buy basic food.
In the last six months of 2010 alone, more than 44 million people were driven into extreme poverty as a result of rising food prices. At the same time, banks and financial investors are making a killing. We estimate that Barclays makes up to £340 million a year from betting, or speculating, on food prices. In the last five years, the amount of financial speculation on food has nearly doubled, from $65 billion to $126 billion.
Our report, The great hunger lottery explains food speculation and its impacts on the world’s poorest people while our latest report, Broken markets provides a more technical explanation of how financial speculation drives up food prices.
They have created a petition to lobby banks and politicians to stop this commodity trading speculation, and Barclays bank are the first bank to publicly step up and support the change.
This is a massive change and achievement for the campaign, who only recently posted that:
Barclays Capital's role in food speculation is driving up global food prices and leaving millions facing hunger and malnutrition. Barclays is the UK’s biggest player in food speculation and helps other financial players bet on hunger too.
Top UK player in food speculation
- Barclays is the UK banking sector’s market leader in food speculation and is the only UK bank that has any real presence in commodities trading. RBS has sold off its commodities division and HSBC is involved primarily in metal markets rather than food.
- Barclays' dominance in the commodities market is widely recognised within the financial industry itself: winning the Risk Magazine Award for Commodity and Energy Derivatives House of the Year for 2008, 2009 and 2011.
- It is estimated that Barclays could be making as much as £189 million a year from speculating on food. Barclays is also the leading European player in oil speculation which is driving up oil prices. Since oil is a key input in agricultural production, higher oil prices means higher costs of production and therefore rising food prices.
New Barclays CEO announced on 12th February that this would stop:
Barclays announced an end to its speculation on food on Tuesday, even though the bank made up to an estimated £278 million from the trade in 2012. The figure brings the bank’s total revenue from food speculation from 2010 to 2012 to an estimated three quarters of a billion pounds.
The bank has pulled out of speculative deals with hedge funds. Campaigners welcome this move but are disappointed by its decision to continue selling investment products that allow other financial players, like pension funds, to speculate.
The £278 million figure was released today by the World Development Movement, which is calling for regulation to prevent banks betting on food prices and contributing to the global hunger crisis.
Barclays has been the leading UK player in speculating on food. Goldman Sachs is widely recognised as the world leader.
Barclays’ withdrawal follows announcements in 2012 by several German, Austrian and Scandinavian banks that they would reduce or suspend trading in food commodity markets. But German giant Deutsche Bank, one of the banks indicating a withdrawal, has since returned to speculating on food.
Legislation to curb speculation is on the table at the EU, but the UK government has so far opposed effective controls.
Interesting to see:
- How a social movement can change a bank's policies
- How a bank is resp0nding to the social need to change
On the latter point, it's all part of Barclays rehabilitation to shake off the Bob Diamond era and this move, along with others taken in February, mark that new CEO Antony Jenkins is serious about change.
It's not just banks. Millions will starve to death around the world because of senators in Iowa and 27 other states who want ethanol boondoggles.
In 2007 the US Congress required gasoline producers blend 15 billion gallons of ethanol into the nation’s gasoline supply by 2015.
Additionally the US has been suffering a drought since last spring. This has pushed the price of corn up to record levels.
Ironically it is well documented that ethanol produces less energy than it consumes.
Posted by: tonyw | March 06, 2013 at 01:12 PM
Thanks for addressing this.. Speculative trade on primary needs such as certain foods and water should simply be made forbidden. That is a collective interest, not corporate.
“The markets” do not automatically organize themselves.. If they do attractors emerge as coordinators of the system that gave rise them them. In that sense, the free market creates its own regulation.
And there we have all those mis-used ideologies where collective arrangements in the form of governments deliberately stepping back where they should not.. there's a difference between 'go with the flow' and drowning.
Posted by: Paul Peters | March 06, 2013 at 01:45 PM