Food crisis

From the NYT

- Across Globe, Empty Bellies Bring Rising Anger:

In Cairo, the military is being put to work baking bread as rising food prices threaten to become the spark that ignites wider anger at a repressive government. In Burkina Faso and other parts of sub-Saharan Africa, food riots are breaking out as never before. In reasonably prosperous Malaysia, the ruling coalition was nearly ousted by voters who cited food and fuel price increases as their main concerns.

“It’s the worst crisis of its kind in more than 30 years,” said Jeffrey D. Sachs, the economist and special adviser to the United Nations secretary general, Ban Ki-moon. “It’s a big deal and it’s obviously threatening a lot of governments. There are a number of governments on the ropes, and I think there’s more political fallout to come.”

and

The Poor Eat Mud

In Haiti, where three-quarters of the population earns less than $2 a day and one in five children is chronically malnourished, the one business booming amid all the gloom is the selling of patties made of mud, oil and sugar, typically consumed only by the most destitute.

“It’s salty and it has butter and you don’t know you’re eating dirt,” said Olwich Louis Jeune, 24, who has taken to eating them more often in recent months. “It makes your stomach quiet down.”

At Der Spiegel

- The Role of Speculators in the Global Food Crisis, we have another part of the story.

Commodity speculation spread long ago from standard products like oil and gold to anything edible and available for trade on the Chicago Futures Exchange. These days there are futures contracts for everything from wheat to oranges to pork bellies. The futures market is a traditional tool for farmers to sell their harvests ahead of time. In a futures contract, quantities, prices and delivery dates are fixed, sometimes even before crops have been planted. Futures contracts allow farmers and grain wholesalers a measure of protection against adverse weather conditions and excessive price fluctuations. They can also help a farmer plan how much to plant for a given year.

The Chicago Board of Trade is the nerve center for global futures contracts.
But now speculators are taking advantage of this mechanism. They can buy futures contracts for wheat, for example, at a low price, betting that the price will go up. If the price of the grain rises by the agreed delivery date, they profit.

Some experts now believe these investors have taken over the market, buying futures at unprecedented levels and driving up short-term prices. Since last August, this mechanism has led to a doubling in the price of rice — including the 500,000 tons that the Philippine government plans to buy in early May to address its own shortage.

Greg Warner has worked in the grain wholesaling business for more than two decades. His office sits a block away from the Chicago Futures Exchange. He’s an analyst with the firm AgResource, and he says what is happening now in the wheat market is unprecedented.

“What we normally have is a predictable group of sellers and buyers — mainly farmers and silo operators,” he says. But the landscape has changed since the influx of large index funds. Fund managers seek to maximize their profits using futures contracts, and prices, says Warner, “keep climbing up and up.”

He’s calculated that financial investors now hold the rights to two complete annual harvests of a type of grain traded in Chicago called “soft red winter wheat.”

Wagner is stunned by such developments. He sees them as evidence that capitalism is literally consuming itself.

Capitalism is literally consuming itself.