Banks making millions out of starving millions through food speculation

Banks make hundreds of millions by betting on the world’s food crisis while millions of people fight starvation. Metro takes a look at the workings of food speculation and what is being done to stop it.

Financial investors betting on the price of food are driving up prices, putting the lives of millions at risk, campaigners claim.

Last month, it was revealed Barclays had made about £500million over the past two years on food speculation.

But in the developing world, where a higher proportion – up to 90 per cent – of income goes on food, rising prices can be a matter of life and death. There are many reasons for rising prices, including the weather. But food speculation is a major contributing factor, with the activity of investment banks, hedge funds and other financial players in commodity markets leading to high and unpredictable prices.

Barclays is one of three key global players, along with Goldman Sachs and Morgan Stanley, speculating on food commodities, including staples such as maize and wheat.

Regulations that were previously in place to protect those who grew or sell food were removed in the 1990s. With the amount of money to be made gambling on the markets, the banks, hedge fund managers and pension funds moved in. Financial speculation on food almost doubled between 2006 and 2011. In 2006, the value of financial assets in food markets was £40billion; by 2011, it was £78billion. Financial speculators now dominate commodity markets, holding more than 60 per cent of some markets in 2011, compared with 12 per cent in 1996.

While speculators do brisk business, food price rises can wreak havoc in the developing world.