http://www.guardian.co.uk/global-development/2011/sep/13/financial-speculators-spiralling-food-pricesThe activity of financial speculators is overwhelming agricultural commodities markets, fuelling global food price inflation and hunger, according to new analysis from the anti-poverty group the World Development Movement (WDM).
Its report, Broken Markets, published on Tuesday, finds that financial speculators with no interest in the physical goods traded now dominate agricultural commodity markets. WDM's report coincides with news that food inflation in the UK was running at 6.2% (pdf) in August. Annual inflation on bread and cereals was even higher, at 7.1%, compared to headline inflation of 4.5%, according to figures just released by the Office for National Statistics.
WDM says the spiralling food prices are being driven by financial players taking over commodities markets. Those on low wages in the UK and the poorest in developing countries are hit hardest, since they spend a larger proportion of their income on food.
Financial speculators now account for more than 60% of some agricultural futures and options markets, compared to just 12% 15 years ago, the development group says. Those with direct commercial interests in food production used to be the main participants, but now hold less than 40% of the market compared with 88% in 1996. The result is that agricultural markets no longer respond to underlying fundamentals of supply and demand and fail to provide producers with an effective way to hedge their risks.
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