Speculation in Agricultural Commodities: Driving up the Price of Food Worldwide and plunging Millions into Hunger CFTC treads water on world hunger

Global Research
Edward Miller

The Commodity Futures Trading Commission (CFTC) has again delayed the introduction of position limits required under the Dodd-Frank Act. These limits are intended to prevent speculation in (among other things) agricultural commodities, speculation which, many critics argue, have driven up the price of food worldwide and plunged millions into hunger.

In late 2006, the price of food and other commodities began rising precipitately, continuing throughout 2007 and peaking in 2008. Millions were cast below the poverty line and food riots erupted across the developing world, from Haiti to Mozambique. While analysts initially framed the crisis in terms of market fundamentals (such as rising population, increased demand for resource-intensive food, declining stockpiles, biofuel and agricultural subsidies, and crop shortfalls from natural disasters), a growing number of experts have tied the massive spikes to financial intermediation. As economist Jayati Ghosh explains:

“It is now quite widely acknowledged that financial speculation was the major factor behind the sharp price rise of many primary commodities , including agricultural items over the past year ... Even recent research from the World Bank (Bafis and Haniotis 2010) recognizes the role played by the “financialisation of commodities” in the price surges and declines, and notes that price variability has overwhelmed price trends for important commodities.”

Trading Regulation for Financialisation

This kind of speculation was made possible by deregulation in the US financial sector, in particular the Commodity Futures Modernization Act 2000 (CFMA), exempting commodity futures trading from regulatory oversight. Crucially for our narrative, this removed limits on the number of contracts that could be held at any one time (called position limits) from the equation. Firms like Goldman Sachs, Morgan Stanley and Barclays began developing index funds (collective investment schemes) based on these commodities, specializing in buying futures contracts in the belief that the future price will be higher than the present price. Journalist Fred Kaufman eloquently stated this in his Harpers article ‘The Food Bubble’:

“Goldman Sachs envisioned a new form of commodities investment, a product for investors who had no taste for the complexities of corn or soy or wheat, no interest in weather and weevils, and no desire for getting into and out of shorts and longs - investors who wanted nothing more than to park a great deal of money somewhere, then sit back and watch that pile grow.”

All manner of institutional investors began dumping capital into these funds, driving prices, and profits, through the roof:

“As the global financial system became fragile with the continuing implosion of the US housing finance market, large investor, especially institutional investors such as hedge funds and pension funds and even banks, searched for other avenues of investment to find new sources for profit. Commodity speculation increasingly emerged as an important area for such financial investment.”

Traditionally, futures contracts play an important role in price discovery, reducing the price risk of the commodity itself. However without a limit to the number of commodity futures contracts that could be held, investors were able to withhold huge amounts of food from entering the market. When combined with the real supply and demand factors mentioned above, this spelt volatile price spikes; between 2005 and 2008 the price of maize nearly tripled, wheat prices increased by 127%, and rice by 170%. Throughout the crisis, at least 40 million people went driven into hunger, and the number of people driven into extreme poverty rose from 130 to 150 million.

And worse, this speculation wasn’t limited to the 2007-2008 period. While commodity prices fell again in 2009, the latter half of 2010 saw them again skyrocket, reaching an all-time high at the end of that year, and remaining high into this year. Today, over a billion people remain hungry, while wealthy investors continue to reap huge profits by gambling on the stomachs of the world’s most vulnerable.

Dodd-Frank Reform

Following the global financial crisis, Representative Barney Frank and the Chairman of the Senate Banking Committee Chris Dodd proposed legislation to boost US financial stability. The Dodd-Frank Act provided sweeping financial reforms to the US financial sector, including reforms to commodity futures regulation. Section 737 (4) requires the CFTC to ‘establish limits on the amount of positions, as appropriate, other than bona fide hedge position, that may be held by any person with respect to contracts of sale for future delivery or with respect to options on the contracts or commodities traded on or subject to the rules of a designated contract market.’ These limits should, ‘to the maximum extent practicable ... diminish, eliminate, or prevent excessive speculation ... [and] deter and prevent market manipulation, squeezes and corners...”.

So far so good right, problem solved? Think again. The legislation provided a 270-day window in which position limits were to be put in place, meaning that by the 17th of April this year, this problem should have been solved, or, at the very least, ameliorated. However that date came and went, and the CFTC failed to reach agreement. A new date was set for the 4th of October, however that date also came and went with no further advance. CFTC Chairman Gary Gensler responded, saying “We’re not trying to do this against a clock. We’re trying to do this in a way that gets it right. So a few more weeks is a small thing for us to be concerned with if we’re going to get it thought through in a better way.” The rules have now been delayed until October 18.

The Speculators Fight Back

The CFTC isn’t so much concerned with world hunger as its reason for regulating commodity futures, and has hardly addressed the issue in public statements. However futures trading also affects other commodities such as oil, gold and silver, all of which have risen sharply over the past few years. Robert Pollin and James Heintz of the Political Economy Research Institute at the University of Massachusetts calculate that,

British Corporation Mass Murdering Ugandans in UN Sanctioned Land Grab

Activist Post
Tony Carlucci


Beneath fraud, media spin, & UN stamps of approval, awaits an unfolding nightmare for the people of Africa and the world. 

The New York Times recently reported in an article titled, "In Scramble for Land, Group Says, Company Pushed Ugandans Out," that the British "New Forests Company" has evicted over 20,000 people from their land in Uganda to make way for tree plantations. Homes were burnt, people, including women and children, were brutalized and murdered during the long eviction process. However, the New York Times states that in this case "the government and the company said the settlers were illegal and evicted for a good cause: to protect the environment and help fight global warming."

The "group" the New York Times is referring to is Oxfam, which published a report titled, "The New Forests Company and its Uganda plantations," detailing the activities of New Forests in Uganda and the evictions the New York Times gingerly describes in its article.

Who is The New Forests Company? 

Meet "New Forests," a UK-based firm that claims to be a "sustainable and socially responsible forestry company with established, rapidly growing plantations and the prospect of a diversified product base for local and regional export markets which will deliver both attractive returns to investors and significant social and environmental benefits." Their corporate website is not short of the color green, nor of African people smiling and prospering, so apparently, we are left to believe, New Forests has made good on their mission statement.

Image: Taken from New Forests' website, they proudly display the swath of destruction their company is responsible for, of course, instead of depicting the displacements, murders, and thuggery they are committing against the people of Africa, they place images of thriving trees.
....

Meet Robert Deveruex, chairman of New Forests, one of the founding shareholders of The Virgin Group and former chairman of Soho House Group. He has spent a great deal of time and energy making what his corporation is doing in Africa appear to have a philanthropic spin. In an August 2010 Guardian article titled, "Robert Devereux donates £4m of art collection to set up African charity," Devereux claims of his New Forests company that it "has a huge community development programme. It's not philanthropy. We go to the community and we say, 'We want to co-invest with you. If you provide what labour and materials you can, we'll provide money for things that you can't get.'" Devereux, however, never mentioned what happens if the community says, "no thanks."

Photo: Robert Devereux, a long time investor, a long time con-artist spinning his company's despoiling of Africa as some sort of cutting-edge investment strategy that makes money and "helps" people. Even as Devereux made his disingenuous statements in 2010 regarding New Forests, the villagers in Uganda he was "helping" had already filed a court case a year earlier protesting the British company's encroachment on their land.
...

Meet New Forests executive director and CEO Julian Ozanne, who previously worked for the Financial Times, advised US and European investment banks on business and political risk in Africa and worked for the global corporate-fascists nexus, the World Economic Forum. Also serving as a New Forest director is Jonathan Aisbitt, chairman of the investment firm, The Man Group, and previously a partner and managing director at the now notorious Goldman Sachs.

There is also Avril Stassen, who is not only a director at New Forests but is also currently a principal at Agri-Vie Investment Advisers, which claims to be "focused on food and agribusiness in Sub-Sahara Africa with a mission to generate an above average investment return, as well as demonstrable socio-economic development impacts through its equity investments in food and agribusinesses." In other words, buying up land in African nations people depend on to live, to instead broaden foreign investors' portfolios and profits, all under the cover of feel good rhetoric and pictures of smiling Africans pasted all over their website and annual reports. A good website that seems to be keeping watch on Agri-Vie is Farmlandgrab.org, which in one short URL explains exactly the game Agri-Vie is playing.

And finally, meet Sajjad Sabur, also a director at New Forests, as well as a managing director at HSBC, heading the mega-bank's "Principal Investments Africa" branch which targets African businesses with management buyouts, growth capital and recapitalization "opportunities." Sabur's HSBC invesment arm has actually invested in New Forests.

Quite clearly, this looks more like the profile of a Wall Street-London corporate-fascist hit team than anything at all involving humanitarian, environmental, or social concerns. And judging by Oxfam's report and the subsequent attempt by the New York Times to mitigate the gravity of what the largest banks in the world are doing to Africa, it seems like a corporate-fascist hit is just what is unfolding in Uganda at New Forests' hands.

Globalization is Modern Day Imperialism by Anglo-American Bankers

Backtracking to New Forests' mission statement, apparently "social responsibility" equates to murdering or displacing tens of thousands of Ugandans in their own nation, and "attractive returns" equates to the extraction and exportation of Ugandan resources for a corporation's shareholders 4,000 miles away. What we are told is of significant "benefit" to society and the environment looks more like a textbook case of imperialism, perpetrated by British, surely new to being socially and environmentally responsible, but certainly not to imperialism nor gimmicks used to mask it behind noble causes.