Food speculation is the business practice of “betting” on whether food prices will go up or down. In a recent report (pdf), WDM attempts to expose this issue.
The world is facing a global food price crisis. In 2008, food prices reached record levels, rising 80% in 18 months, pushing the total number of people going hungry to over 1 billion. Following this peak food prices rapidly declined. However, since 2009 the cost of food has been climbing again on global markets, with food prices reaching record highs once again in early 2011. Many commentators expect food prices to continue to rise, threatening the lives and livelihoods of millions of people.
This huge increase in the cost of food and a sharp increase in food price volatility over recent years triggered a global debate on the causes and solutions to this crisis. Some factors are widely agreed to have had an impact on food prices, such as declining crop yields as a result of climate change, the impact of growing demand for biofuels and the long-term neglect of investment in agriculture by governments around the world.
The role of financial speculation in contributing to this crisis has been much more controversial. Many have argued that the huge increase in financial participation in commodity derivative markets has played a central role, fueling price inflation and increasing price volatility. In the UK, the World Development Movement has played a pioneering role in drawing attention to the impacts of financial speculation.