The world may be on the brink of a major food crisis caused by environmental disasters and rampant market speculation, the U.N. has been warned at an emergency meeting on food price inflation.
The U.N.'s Food and Agriculture Organisation (FAO) meeting in Rome was called last month after a heatwave and wildfires in Russia led to Moscow banning wheat exports and food riots broke out in Mozambique, killing 13 people. But U.N. experts heard that pension funds and hedge funds, sovereign wealth funds and large banks who speculate on commodity markets may also be responsible for global inflation in food prices.
In a paper released this week, Olivier De Schutter, the U.N.'s Special Rapporteur on food, said the increases in price and the volatility of food commodities could only be explained by the emergence of a “speculative bubble” which he traces back to the early years of the new century.
“[Beginning in] 2001, food commodities derivatives markets, and commodities indexes began to see an influx of non-traditional investors,” writes Mr. De Schutter writes. “The reason for this was because other markets dried up one by one: the dotcoms vanished at the end of 2001, the stock market soon after, and the U.S. housing market in August 2007. As each bubble burst, these large institutional investors moved into other markets, each traditionally considered more stable than the last. Strong similarities can be seen between the price behaviour of food commodities and other refuge values, such as gold.” A near doubling of many staple food prices in 2007 and 2008 led to riots in more than 30 countries and an estimated 150 million more people going hungry.
“Once again we find ourselves in a situation where basic food commodities are undergoing supply shocks. World wheat futures and spot prices climbed steadily until the beginning of August 2010, when Russia — faced with massive wildfires that destroyed its wheat harvest — imposed an export ban on that commodity. In addition, other markets such as sugar and oilseeds are witnessing significant price increases,” said Mr. De Schutter.
In London on Friday, Mr. De Schutter said the only long term way to resolve the crisis would be to shift to ways of growing food that do not depend on pesticides or heavy machinery. — © Guardian Newspapers Limited, 2010