Don't play with food

There are now, or soon will be, seven billion people on our planet, and around one billion of them are affected by hunger and malnourishment. Many more live in poverty and have to spend more than half of their income on food. It is therefore alarming when the prices for globally traded food commodities, such as wheat and rice, are increasing in real terms, as this development may push many more people over the edge. The FAO food price index for August 2011 has noted a 26% increase compared with August 2010, suggesting that the steep price increase observed from 2007 to 2008, and only stopped by the onset of the financial crisis, is back in full swing. A recent Oxfam report (Exploring food price scenarios towards 2030 with a global multi-region model by Dirk Willenbockel, available online) shows that food prices in real terms have doubled in the last 20 years and predicts they will rise even more steeply in the next 20. Financialisation of the food market Why do these prices rise? In its projection of prices up to 2030, Oxfam blames half of the price rise on climate change. Additional factors that are often cited include the increasing land use for biofuel production, the increasing demand for high protein food (e.g. meat) from newly affluent populations in fast-growing economies such as China, the mismatch between the growth rates of world population and agricultural productivity, lack of investment in agriculture, and the increasing energy prices that affect production and transport of food commodities. All these factors certainly play some part, but many have come to think that they don't completely explain the mad rollercoaster ride that food prices have seen in recent years and that are likely to continue. Experts in the food trade and industries point out that the prices no longer reflect the real situation of supply and demand. Starbucks CEO Howard Schultz told the German news magazine Der Spiegel in a recent interview that he had spoken to all of the company's suppliers in around 30 countries and found that none had a supply shortage, and still the prices were rising. Schultz concluded that the coffee price was driven up by speculation and financial dealings. In a more detailed analysis summarised in a recent report, the UN Conference on Trade and Development, UNCTAD, studied the impact of 'financialisation' on the market and the prices of …