T
oday, G20 agricultural ministers are meeting in Paris, and food speculation is on the agenda. Will this be the week we finally see some political action on commodities speculation? The hosts are serious about the issue. “Speculation, panic and lack of transparency have seen prices soaring,” said president Sarcozy recently. “Is that the world we want? France is saying quite clearly it is not.”
Unfortunately the UK is probably saying yes it is, this is the world we want. The City of London makes good profits out of commodity speculation. If previous experience is anything to go by, the UK will be the loudest voice in the room in support of the banks.
From the oppulence of a G20 summit, it’s easy to talk about rising food prices in the abstract. Hunger and scarcity will not be much in evidence, as ministers look forward to 20 course dinners at the end of a long day of meetings. Even for us mere mortals, global food prices aren’t particularly pressing. That’s because in higher income countries, we only spend a fraction of our earnings on food, maybe 10%. In low income countries, it’s more like 80%.
That means that rising food prices wreak havoc with the diets and daily lives of the world’s poor. Behind the commodity indices and spiking graphs are real people forced into impossible compromises.
If you can imagine spending 80% of your income on food, then you can imagine the sorts of things you’d need to do if prices rose. You’d skip breakfast. You might have to send your kids to school without lunch. You’d eat the bits of the chicken you normally throw away. You’d learn to drink your tea without sugar. You’d have to cook what you could afford, rather than what you like – meaning plainer food, with less variety.
These are the sorts of stories researchers heard when they went and asked how people were coping, gathered in the Oxfam report Living on a Spike. In Kenya, there’s a word for turning up hopefully at a friend’s house right around dinner time. During a food price spike, the rules of the labour market reverse: informal sector day labourers are able to charge more to meet the prices, while workers with formal jobs and a fixed salary feel the squeeze. Most people manage to keep up with the calories they need, but nutritional value falls, protein intake in particular. Many are forced to work longer hours, change jobs, or grow more of their own food where they can.
Commodity speculation is just one factor behind spikes in the price of food, but it’s the easiest to fix. There is a clear moral case for doing so. Will this be the week our world leaders address the realities of volatile food prices, and get serious about food speculation?
- See World Development Movement for more about speculation
- See Duncan Green’s blog for more about Oxfam’s research
The Earthbound Report 
Thanks for sharing this, Jeremy. Something needs to be none about this. However, I’m still trying to understand exactly how this works. I see that speculation drives up the price of futures. The futures are for the cheapest crops, such as wheat and corn. So when prices go up, the poor actually end up buying more of these crops, while buying less of other types of food. The commodity crops must then be “inferior goods”, while the foods that are given up during the price hikes are superior goods. At first I was thinking that higher prices would lead to less consumption, which would not allow the speculation schemes to work, but now I see why this is not the case. Gnarly stuff.
Not necessarily, as these are staple foods and not always the cheapest. In Madagascar everyone ate rice. If there was a poor harvest, people might end up buying cheap imported rice instead of the ‘vary gasy’ local rice that they preferred, so it was a substitution. For the poorest, even that was too expensive and they ate casava.
The other thing that happens is that people keep buying and eating the same amount of the staples, but cut back on all the things that go with it. They’ll cook simpler recipes that don’t need oil or fresh vegetables.