FOOD WARS

Walden Bello and Mara Baviera
originally posted on Monthly Review

EXCERPT:

The international press and academics proclaimed the end of the era of cheap food, and they traced the cause to a variety of causes: the failure of the poorer countries to develop their agricultural sectors, strains on the international food supply created by dietary changes in China and India’s expanding middle classes who were eating more meat, speculation in commodity futures, the conversion of farmland into urban real estate, climate change, and the diversion of corn and sugarcane from food production to the production of agrofuels to replace oil.

The United Nations’ World Economic Situation and Prospects spoke about the crisis being the product of a “perfect storm,” or an explosive conjunction of different developments. Speculative movements that brought about the global financial crisis that broke out in the summer of 2007 were implicated in the food crisis. According to the United Nations, the impact on food prices of speculation by financial investors in commodities and commodity futures markets “has been considerable.” It could be argued, said the report,

that increased global liquidity and financial innovation has also led to increased speculation in commodity markets. Conversely, the financial crisis contributed to the slide in commodity prices from mid-2008 as financial investors withdrew from commodity markets and, in addition, the United States dollar appreciated as part of the process of the de-leveraging of financial institutions in the major economies.4

Others, like Peter Wahl of the German advocacy organization WEED, were more emphatic, claiming that, in fact, speculation in agro-commodity futures was the key factor in the extraordinary rise in the prices of food commodities in 2007 and 2008. With the real estate bubble bursting in 2007 and trading in mortgage-based securities and other derivatives collapsing, hedge funds and other speculative agents, they asserted, moved into speculation in commodity futures, causing a sharp increase in trades and contracts unaccompanied by little or no increase in production of agricultural commodities. It was this move into commodity futures for quick profits followed by a move out after the commodities bubble burst that triggered the rise in the FAO food price index by 71 percent during only fifteen months between the end of 2006 and March 2008 and its falling back after July 2008 to the level of 2006.5

LINK: http://focusweb.org/food-wars.html?Itemid=1