The international events of this past few days have distracted from financial news on the destructive nature of our current capitalistic religion: now that most finance companies and international speculators have ruined the property market and can no longer leverage their profits from the burst bubble, they are turning to food commodities.
All it takes is a quick reading of the latest UN reports in the past few days which indicate that up to 70% of business on commodity markets is speculative rather than trade. Furthermore the FAO indicates that food prices could rise as high as 40% over the next few years as a result.
Something is rotten in Denmark! Global food prices in December were the highest on records dating back to 1990! The consequences are far reaching as it could spark a repeat of 2008's food shortages and riots overseas, leading to increased famine in the most vulnerable parts of the world. In Europe and North America people already suffering from dire austerity programs, reduced services and new stealth taxes will bear the brunt of this new bubble. Politicians must be doing more, much more to question, implement and legislate new regulations on gangsters international traders which can mitigate the rising prices. IMHO, it wouldn't hurt to give reins to a new body which would have the powers to prosecute the ruthless speculators, and by this I don't mean the IMF or the World Bank which can be vulturistic in their dealings.
"Things could become explosive again in 2011, and that's what people are concerned about," said Daniel Gustafson, director of the Washington office of the Food and Agriculture Organization of the United Nations, "people rioted in 32 countries in 2008 after skyrocketing rice prices led some nations to hoard the grain and others couldn't secure what they needed".
Now we all know that extreme weather fueled by Climate Change has also a part to play in this but let me relate a story that is emblematic of our times, written by the brilliant John Vidal of the Observer, full article here (I urge you to read it and for the sharp-eyed Kossack, you will notice that this article is sponsored by no less than the Bill & Melinda Gates Foundation, which, as you may know, heavily promotes agrofuels:
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.
Please take the time to read the entire article to understand how foods have been turned into derivatives, and unusually high speculative bets by billionaires, multinationals and Wall Street traders have sent the prices of basic staples soaring across the globe, leaving hundreds of millions in the brink of starvation and creating unprecedented political instability. If you think I'm exaggerating, read this.
We’ve seen food prices lead to popular revolts in Tunisia and Egypt, where the poor have taken to the streets in anger at the opulent lifestyles of the few who profit by their misery (mind you, mightily helped by WikiLeaks who revealed the splendor in which the rulers lived) and I fear that the financialization of grains, meat, and other food commodities represents the worst form of corruption, where dollars & euros are traded against human lives. Add to this the insane demand for crop-derived fuels [agrofuels], and the elements of an unprecedented global food crisis become a reality. For the full table below, click on this link.
The Index averaged 231 points in January and was up 3.4 percent from December 2010. This is the highest level (both in real and nominal terms) since FAO started measuring food prices in 1990. Prices of all monitored commodity groups registered strong gains in January, except for meat, which remained unchanged.
There are no easy solutions to this problem. My guess is that we're all going to have to tighten our collective belts in the years to come. Ramen noodles have never looked this tantalizing!