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WORLD: Food-Commodity Speculation by Banks Caused Hunger, Group Says

by Rudy RuitenbergBloomberg
August 5th, 2010

Speculation in agricultural commodities by banks caused hunger during the 2008 food crisis by amplifying price surges, World Development Movement said.

Higher food and crude-oil prices reduced real incomes worldwide, with the greatest effect on the poorest people, the London-based anti-poverty campaign group said in a report. Speculators accounted for 65 percent of bets on rising corn prices between 2006 and 2008, according to United Nations Conference on Trade and Development figures cited in the study.

“The main reason for speculation is to make large profits for multinational banks,” the group said in the report, titled “The Great Hunger Lottery.” “This is one of the most striking examples of the injustice of profit being put ahead of people.”

Riots broke out from Haiti to Egypt in 2008 as the UN’s food-price index rose to a record in June of that year. Wal-Mart Stores Inc. restricted purchases of some types of rice at its Sam’s Club warehouse unit in April 2008 as prices for the grain climbed to an all-time high. The food-price gauge has since dropped 24 percent from its peak.

Regulating commodity markets is “vital” to tackling hunger, World Development Movement said. The group advocated trading of derivatives on exchanges with regulated clearing to prevent default on contracts and “toxic debt sweeping through the financial system.”

“Opposition to regulating commodity derivatives comes from those in the financial industry with a vested interest in the profits they make from the unregulated markets, particularly the large banks,” World Development Movement said.

Speculation has made futures markets less accurate in predicting real prices for commodities, increasing the difficulty for central banks of forecasting inflation, the poverty-fighting group said.

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