Profiting from Rising Food Prices

Press Release—World leaders in Rome need to urgently look at the role of commodity speculators in causing the current food price crisis and stop them profiting from hunger, according to ActionAid.

"The UN task force on the food crisis needs to look at how speculation in agricultural commodities can be curbed," said Magdalena Kropiwnicka, ActionAid’s Food Policy analyst.

Unprecedented inflows of speculative investment in commodity futures, which according to expert estimates reached as much as $1bn a day during February and March, have made prices more volatile and divorced prices from what is actually being produced on the ground.

ActionAid called for the UN Task Force on the food crisis to make concrete proposals to the UN General Assembly in September on measures to stabilise prices or control speculation, such as increasing food buffer stocks, limiting trading positions, raising margin deposit requirements, or taxing speculative transactions.

"Stable agricultural markets, where prices reflect real supply and demand conditions are essential if agricultural systems in developing countries are to be rebuilt, and if developing countries are to enter regional or global markets for agricultural commodities on fair terms.

It’s not just speculators who have gained from the food price rises of recent months. Although they don’t have the same role in causing the crisis, big agribusiness companies have proved that they can profit from it. Cargills recently announced profits that were up 86 per cent on the same period last year. Food processing giant Archer Daniels Midland reported a near-700% increase in the profits of its agriculture services division in the first quarter of 2008, which includes the company’s grain-trading, grain-transporting and grain-handling businesses.

"It’s clear that TNCs have been making record profits from food while poor people worldwide cannot afford to eat. This is a particularly grotesque illustration of how the world’s economy is organised for the benefit of the rich rather than the poor," added Kropiwnicka.

"For example, a few companies in the rich world benefit from huge agricultural subsidies while the right of developing country governments to protect their own farmers is being whittled away."

As oil prices top $100 a barrel, biofuels are another sector where investors, aided and abetted by governments giving biofuel production incentives, can reap huge profits at the expense of hungry people. Spurred on by government subsidies, American farmers have diverted 30 percent of corn production into ethanol. The European Union, India, Brazil and China all have their own targets to increase biofuels.

According to the World Bank, global maize production increased by 51 million tonnes between 2004 and 2007. During that time, biofuel production in the US alone rose by 50 million tonnes, eating up almost the entire global increase.

ActionAid is calling for the US and EU to end targets and subsidies for biofuels, and a five year moratorium on the diversion of arable land into biofuel mono-cropping.

As well as offering support for people affected today, world leaders in Rome this week have to start the process of reorganising the world’s food markets so that they work for poor people.

ActionAid is an international anti-poverty agency working in over 40 countries taking sides with poor people to end poverty and injustice together.

ActionAid’s HungerFREE campaign calls on governments to deliver on their commitment to halve world hunger by 2015.

<< Back to main