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25 Sep 2010 06:50
The world could be on the brink of a major new food crisis caused by environmental disasters and rampant market speculators, the UN will be warned on Saturday at an emergency meeting on food price inflation.
The UN’s Food and Agriculture Organisation (FAO) meeting in Rome was called last month after a heatwave and wildfires in Russia led to a draconian wheat export ban and food riots broke out in Mozambique, killing 13 people. But UN experts will also hear that pension and hedge funds, sovereign wealth funds and large banks who speculate on commodity markets may also be responsible for inflation in food prices being seen across all continents.
In a new paper released this week, Olivier De Schutter, the UN’s special rapporteur on food, says that the increases in price and the volatility of food commodities can only be explained by the emergence of a “speculative bubble” which he traces back to the early noughties.
“[Beginning in] 2001, food commodities derivatives markets, and commodities indexes began to see an influx of non-traditional investors,” De Schutter writes.
“The reason for this was because other markets dried up one by one: the dotcoms vanished at the end of 2001, the stock market soon after, and the US housing market in August 2007.
He continues: “A significant contributory cause of the price spike [has been] speculation by institutional investors who did not have any expertise or interest in agricultural commodities, and who invested in commodities index funds or in order to hedge speculative bets.”
A near doubling of many staple food prices in 2007 and 2008 led to riots in more than 30 countries and an estimated 150-million extra people going hungry. While some commodity prices have since reduced, the majority are well over 50% higher than pre-2007 figures—and are now rising quickly upwards again.
“Once again we find ourselves in a situation where basic food commodities are undergoing supply shocks. World wheat futures and spot prices climbed steadily until the beginning of August 2010, when Russia—faced with massive wildfires that destroyed its wheat harvest—imposed an export ban on that commodity. In addition, other markets such as sugar and oilseeds are witnessing significant price increases,” says De Schutter.
“The emergency UN meeting in Rome is a clear warning sign that we could be on the brink of another food price crisis unless swift action is taken. Already, nearly a billion people go to bed hungry every night—another food crisis would be catastrophic for millions of poor people,” said Alex Wijeratna, ActionAid’s hunger campaigner.
An ActionAid report released last week revealed that hunger could be costing poor nations $450-billion a year—more than 10 times the amount needed to halve hunger by 2015 and meet Millennium Development Goal One.
Food prices are rising about 15% a year in India and Nepal, and similarly in Latin America and China. US maize prices this week broke through the $5-a-bushel level for the first time since September 2008, fuelled by reports from US farmers of disappointing yields in the early stages of their harvests. The surge in the corn price also pushed up European wheat prices to a two-year high of €238 a tonne.
Elsewhere, the threat of civil unrest led Egypt this week to announce measures to increase food self-sufficiency to 70%. Partly as a result of food price rises, many Middle Eastern and other water-scarce countries have begun to invest heavily in farmland in Africa and elsewhere to guarantee supplies.
Although the FAO has rejected the notion of a food crisis on the scale of 2007-2008, it this week warned of greater volatility in food commodities markets in the years ahead. - guardian.co.uk
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