Over the last few months I’ve been getting a progressively worse sticker shock when I go shopping for groceries. The trend has been worrisome, especially given last years’ total garden failure and the subsequent lack of much in the way of home-canned goods to tide us through the winter.
Even accounting for the lack of home-grown goodies, I estimate our personal grocery bill has gone up by about 25% on items we would have been buying anyway. Even explanations like the sugar beet fiasco didn’t quite seem to make sense because any shortages wouldn’t really hit for another year or so.
So seeing this article yesterday really got my attention:
Food speculation: ‘People die from hunger while banks make a killing on food’
Food speculation? You mean like the real-estate speculation that caused the bubble which has now burst and forced millions out of their homes and into bankruptcy? The same speculation that had banks running roughshod over the little guy, while at the same time allowing a few who knew how to game the system to swindle entire neighborhoods out of their sense of well-being? Apparently so:
“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.”
This graph was just released last week, showing the extent of the price hikes
(thanks to writer lavida locavore for that link)
So if it was unethical when we were talking about people’s homes, what adjective can possibly be used to describe it when it comes to food? How is this going to play out in families (heck, countries) where even a modest rise in costs is going to mean people simply cannot eat?
Well, the rising food prices have already been linked to the uprisings in Tunisia, Egypt, Yemen and Algeria. Many countries are calling for a return of regulations to combat this practice, fearful of even more violence. link to article
“Without naming countries, Le Maire and [FAO Executive Director Jacques] Diouf spelled out the risk that rising prices would fuel more food riots, calling for structural measures – including increased market regulation – to curb price volatility,” …”Regulation does not mean fighting against markets, but improving the way in which markets function,” Le Maire said, … He also “called for an end to market speculation on commodities, saying its equivalent to speculating on world hunger. ‘Speculation on world hunger is economically dangerous and morally unacceptable,’ …
I have to admit that I really had no idea that this was going on. I knew that the increased use of biofuels like corn-based ethanol was causing some problems, and that extreme weather was causing others, but for all of that to be compounded by people trying to game the system in such a morally bankrupt way is some news. It’s also something we need to be aware of when the government and big AG are trying to justify policies regarding GMOs by saying that they are the answer to global hunger. (hint: they aren’t)