Food Scarcity á la Wall Street
Editorial by Eric Holt-Giménez, Executive Director of Food
First/Institute for Food and Development Policy
In Farming Matters, formerly known as LEISA Magazine, small-scale agriculture for a sustainable society, 12, 2011 - 39
A day doesn’t go by that the present food crisis – in which
nearly a billion people are going hungry – is used as proof
of the food scarcity plaguing the planet. There is scarcity
– but not of food. The world produces enough food. People are
going hungry today because they can’t afford food, especially
when prices spike. The recent extreme price volatility and price
spikes cannot be explained by simple supply and demand
models. In fact, there has hardly been any change in world food
demand over the last three years. The falling land productivity
of industrial agriculture, the spread of agrofuels diverting arable
land to fuel crops, climate change and an inadequate investment
in agroecology are all adversely affecting food supply. But
despite their devastating impacts, these supply-side factors
don’t explain the extreme volatility and price spikes in global
food markets seen in recent years.
Food price surges are the result of a new phenomenon: massive
hoarding of food commodity derivatives. These are specialised
financial products invented by powerful financial institutions. As
a result, prices skyrocket because these investors have created a
financially-induced demand, thereby imposing immense artificial
scarcity on the global food market. In 2008 and again in
2010, prices for staple crops like rice, wheat, and corn doubled
and tripled, and extended the grip of poverty and deprivation to
hundreds of millions of people. And what’s more, institutional
investors knew their speculation was driving food prices higher.
The “financialisation” of our food began with the creation of
tradable commodity indexes, which turn some of the basic necessities
of life into speculative assets. The trading of agricultural
commodities, which in itself serves an important function
for corporations with a real stake in agricultural commodities, is
taken advantage of by financial speculators. Financial speculators
are merely concerned with financial profit – not the destination
of the food commodity or the functionality of the global
food system. On top of this, new regulations allow institutional
investors to trade commodity futures contracts without position
limits, disclosure requirements or regulatory oversight.
With the crash of the housing bubble, followed by the economic
recession, institutional investors flocked to the unregulated
commodity index funds. As a result, financial capital
flooded the market, taking massive positions in food and concentrating
them in just a few, corporate hands – without having
to report any of it!
By opening up food commodities to financial speculation, global
food commodity markets have seen the most price volatility
and biggest price surges ever. The Occupy Wall Street
protestors are not off the mark. Wall Street has been occupying
our food system for far too long – with disastrous results.
