‘Broken’ financial markets are driving up food prices, finds a new report released today, as inflation figures show UK consumers are now paying over seven per cent more for bread than a year ago.
The report from anti-poverty group the World Development Movement shows how financial speculation on basic foods is driving spiralling prices around the world, which reached record levels earlier this year.
The organisation claims the UK government risks condemning millions of the world’s poorest people to hunger by failing to back European regulation to curb excessive speculation.
In the last six months of 2010 alone, rising food prices pushed 44 million more people worldwide into extreme poverty.
In the UK figures from the Office for National Statistics record that prices for bread and cereals rose by 7.1 per cent in the year to August, while overall UK food prices rose by 6.2 per cent, both above the headline inflation rate of 4.5 per cent.
Financial players including banks like Goldman Sachs and Barclays, have taken over food markets, says the World Development Movement’s report, with the total assets of financial speculators in these markets nearly doubling from $65 billion to $126 billion in the last five years. Not a single penny of this has been invested in agriculture.
The report, ‘Broken Markets’, finds that financial speculators now hold over 60 per cent of some markets for basic foods, compared to just 12 per cent 15 years ago.
The total amount of money speculated on commodities is 20 times more than the total amount of aid money given globally for agriculture
The huge influx of speculation has forced prices up, resulting in increasing hunger. The price of food in developing countries as a whole has risen by 55 per cent since 2007, while in Sub-Saharan Africa one third of the population do not have enough food.
The report’s author Murray Worthy said: “Financial speculators have flooded food commodity markets, creating massive inflation and sudden price spikes. These broken markets are bad news for people in the UK, whose average annual food bills increased by £260 in one year alone. But for people in poverty in developing countries, who already have to spend a huge proportion of their income on food just to survive, price rises are disastrous. Millions more people are going hungry because reckless investment banks are using food prices to make massive profits.
“The US has already passed legislation aimed at limiting speculation on food prices, and similar European proposals are due to be announced this autumn. It’s disgraceful that the UK government is trying to block European regulation, when a billion people don’t have enough food. It should instead make sure that hard, clear rules are set, to stop this financial game-playing driving up hunger.”
In the US, the Dodd Frank Act, passed in 2010, includes rules to tackle excessive speculation. But campaigners say implementation of the legislation is being slowed by intense Wall Street lobbying aimed at watering down the regulation.