In recent days the prices of many commodities are reaching highs not seen for several years. The overall commodity food price index has increased by 27% in a year; staple foods have risen even more: wheat by 49%, maize by 53%, sorghum by 33%.
Poor harvests are partly to blame – droughts in Russia, Ukraine, Argentina and the US have reduced grain supplies, and floods in Canada, Pakistan and now Australia have wiped out a large part of their crops. Falling global stocks, export bans by Russia and India and rising demand from China have all helped to push prices higher.
However, a more sinister factor is at work: speculation. Investment banks, pension and hedge fund managers have poured over $200 billion into food futures markets in the past 2 years, with sums speculated at record highs. These markets were established to reduce risks to farmers and consumers by dampening price fluctuations, but now foodstuffs have become financial and speculative assets, traded without regard to the impact on the livelihoods of genuine producers and consumers of the commodities – especially the world’s poor, who spend 30-50% of their daily earnings on food.
Every financial transaction is ultimately relational, because the outcome affects people either positively or negatively. Ideally every purchase should benefit both buyer and seller; no monetary decision is ever relationally neutral. Yet the decisions of major financial institutions to invest billions in speculating on food prices shows a complete disregard for the consequences of their actions on the poor.
There is a world of difference between what is legal and what is morally and relationally legitimate.