The banks and our soaring food costs

[LadyBlaBlah]

The rises in inflation and the soaring food costs (which despite reports of 4-5% are more likely around 20% in the last few months) are NOT just to do with global demand. The banks are, yet again, up to no good making money out of speculating now on FOOD commodities

They have simply swapped the speculating they were doing on the sub-prime market, and are now using food to make their money out of nothing.

So when Bob Diamond and those of his ilk say that they deserve their bonuses and enormous profit, maybe they really really don't.

They are forcing up the price of food in their hideous pursuit of making money out of doing nothing and flattering their pathetic ego's without any regard for the people who are struggling to eat. People on here have sometimes said that there is no moral element to banking - can that really be true if they are deliberately screwing up the food commodity markets - because this does have an effect on other human being.

Rant over

some info here

Indonesia to raise food speculation at G20

www.guardian.co.uk/business/2010/jul/19/speculators-commodities-food-price-rises

It's not a new problem.

Its also quite common for politicians and policy makers to attempt to divert blame for their policy errors on 'speculators'.

The EU is trying to blame speculators for selling down Govt bonds and raising interest rates in countries like Ireland and Greece. They never blamed them when rates were low.

Other Govts are blaming speculators for rising food prices but never blame them when they fall.

OPEC Govt routinely blame speculators when oil prices fall but never when they rise.

No Govt blames speculators when house prices were rising because it made homeowners/voters happy. Same with stock markets.

Yes, it's not a new problem and Labour and the Conservative opposition must have known all about it for years. But they kept rather quiet about it. I am surprised that Labour didn't knight some of them for their services to speculation, just as they knighted Fred The Shred for his services to banking.

It does matter if prices fall. If speculators use puts to bring the price down, then the result is that small independent farmers all over the world go bust. Hundreds of Indian farmers were committing suicide a few years ago as prices fell. Falling prices opens the door to large international conglomerates who are the only ones wable to weather the storm. The danger of that is potential monoplies and a subsequent rise in prices. There are powerful people that play the market for their own ends.

Instead of worrying about the problem, they were stoking price rises even more with their green policy of using crops for biofuel instead of feeding people. They were warned that it could lead to mass starvation by people such as Monbiot and many others. But it didn't have much effect on them. They preferred to continue their green global warming policies at their Kyoto summits. We had only '50 days to save the planet' they told us.

Yes, it's not just banks, there are all sorts of players. What it needs is regulation, something that Labour failed to do adequately in the financial markets.

Yes, Labour failed along with the rest of the world. There is no excuse for letting this happen again. Insanity is doing the same thing and expecting different results, bla bla bla

The question is, is do we want our food prices messed about with so a small number of people can line their pockets with gold?

No we don't. But will anything change?

Who will change things?

Who will change things?

We unfortunately need to rely on our government to do this in conjunction with oter countries. America have made a start and this should be followed by others.

This is when it becomes a big problem that our government is made up of people would never fear starvation and hunger in their wildest dreams.

Yes, you are right. It's good that you brought the issue up.

Thanks for the links, LadyBlablah. Steep learning curve for me here.

I still think that you're making a skewed argument and it is misleading. Food prices are rising but the commodity trading element of the cost increase is not the biggest reason in the majority of products. I sell an imported product to UK supermarkets and will be trying to make more money this year not because our product is traded on the commodity markets but because our costs of production have risen.

My cauliflower example was actually in the news the other day, along with purple sprouting broccoli, of all things. The severe winter has severely hit production and less volume = higher prices.

Bananas... the biggest volume fruit purchased, started last year at around 89-99p/kilo... dropped to around 59p/kilo last summer (to the horror of producers) and are now retailing at 77p/kilo. There is far more to the cost of a typical UK shopping basket than maize, rice and cocoa...

Another interesting article on the same subject.

Like they say, buy land . . . they don't make it any more

Very good article. But as ever, he is another believer in global warming, and omits the obvious truth that diverting so much wheat prodcution into biofuels instead of food for the population, is also having an ompact on food prices. It's not just the nasty bankers and speculators, it's the lovely, caring green governmental policies, and the speculators ride on the back of their policies.

'Kenneth Richter, head of biofuels at Friends of the Earth, said last week's riots showed that food should not be used for fuel. "In a time of rising food prices and global shortages, it is cynical to burn wheat in our cars," he said.'

www.guardian.co.uk/environment/2010/sep/05/wheat-price-fears-over-biofuels

'it is cynical to burn wheat in our cars'

do you think they will change? I don't.
do you think it's just the market? I don't.
do you think they care? I don't.

Get ready for the "carers" to launch lots of appeals to help the starving. But don't expect them to change their policies, they've got more important concerns, they're "saving the planet".

They don't regulate banks adequately and bring the world economy to the brink of disaster, but they are really serious about saving the planet, they really mean it. You can trust them.

How would speculation on food be prevented? Is that actually possible?

BTW, there's a lot of research going on into alternative biofuels which will radically cut the food / fuel conflict. For example, the idea with wheat is to be able to use the straw for the biofuels, while the heads go for food.

This is what the World Development Movement says should be done. Where there's a will there's a way.

"All futures contracts to be cleared through regulated exchanges. Most contracts are currently done in private, which means it is impossible to know how much of what is being traded. Contracts need to be brought out into the open.
Strict limits to be set on the amount that bankers can bet on food prices."

Are futures contracts one of these things that are extremely time dependent? So would the need for them to be cleared be a way of making them not be financially worthwhile?

Should say that the UK government, among others, funds a lot of the next-generation biofuel research, so they seem to be taking the food-fuel conflict seriously, as do certain large oil companies.

Futures contracts are time dependent. Lots of derivatives contracts are over the counter which means that they are between two parties without going through an official regulated exchange. They are off balance sheet, and the authorities don't know how many have been entered into or for what value. No one knows the overall liability. These type of derivative contracts led to the financial crisis, as regulators couldn't accurately determine the solvency of financial firms. If these contracts are cleared through a regulated exchange, then they become visible, and regulators are more able to quantify the risk.

Good news that the government is looking into alternatives to just using wheat for fuel rather than for food.

Increasing margins on commodity futures and forcing OTC forward contracts onto futures exchanges would curtail speculation to some degree.

Higher margins are beginning to happen on some futures exchanges already along with putting absolute limits on how many open speculative contracts a single entity may have in a given futures contract.

That's interesting - thanks. Would you say that restricting speculation is a good thing? And is it actually possible? I would imagine that people spend a lot of time thinking up increasingly clever ways to make money and get around the regs.

I think Chil's points about the rising prices of UK veg are very worthwhile - the thing that's struck me is that in the UK agriculture world, people have been talking about the impacts of rising fuel costs, rising fertiliser costs etc, for several months, but it appears to be news to most people now.

Coming back to the food / fuel conflict again - I always think that the 20th century was an anomaly in not needing to choose between food for humans and 'fuel' in the form of food for horses. There are a lot of UK research teams looking to make sure that we don't go back to the food / fuel conflict, but from what I know of the research so far, I think we're going to run into problems with concerns around GM technology in the crops.

Yes, I think that speculation can be controlled. One way is to tax it at a high rate.

I think we are being lied to about the fuel/food conflict. I think the green, global warming policy is to deliberately use our food for fuel so that prices rise and so that we get a food shortage. This may even lead to mass starvation, as Monbiot has warned. Then the knight on a white horse will arrive; the GM food industry, saying that GM is our only salvation. Then we will have no choice but to accept it. All of the public's fears for our health will be swept aside by the "save the planet" brigade, who will tell us that we have "50 days to save the world from starvation".