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Biofuels, Speculators Driving Food Price Surges
WASHINGTON - A new report on global hunger pinpoints factors at the heart of spikes in food prices it says are exacerbating the unfolding food crisis in the Horn of Africa.
Released ahead of World Food Day on Oct. 16, the report calls for action to control price volatility in the global food market and protect the world's poorest from the scourge of famine.
The Global Hunger Index (GHI), released Tuesday by The International Food Policy Research Institute (IFPRI), Welthungerhilfe, and Concern Worldwide, points to climate change, growing demand for biofuels, and increasing commodities futures trading in global food markets as the causes of price increases in food, which it says were also at the root of the food crisis of 2007-2008.
Price volatility refers to the relative rate at which the price for a commodity changes over time, according to the GHI. The report points to an enduring period of high and increasingly volatile prices for food, which it says has economic, social and political impacts.
The GHI report places countries on an index of hunger based on three indicators: the proportion of undernourished people, the proportion of children under five who are underweight, and the child mortality rate. According to the report, 26 countries face hunger crises. Burundi, Eritrea, Chad and the Democratic Republic of Congo, which had a GHI score that increased 63 percent due to ongoing conflict, top the index with the most extreme levels.
Another major food security report released by the United Nations this week, "The State of Food Insecurity in the World 2011", also highlights data showing that volatile food prices are increasing hunger in the world's poorest countries and forecasts that high prices will continue into 2012.
"Somalia, Ethiopia, Djibouti, Eritrea, and Kenya are severely suffering from a number of factors that contribute to food insecurity," said Wolfgang Jamann, secretary general of Welthungerhilfe, during the Tuesday press conference. "This is just one side of the coin – the other side of the coin is the so-called 'silent hunger' of over one billion people in the world who are suffering from acute or chronic hunger."
Increasing food commodities futures trading, when investors bet on future prices for food commodities, in maize, soybeans, and wheat, have increased prices for those foods, according to the GHI. The report points out that money invested in food commodities futures trading went from 13 billion to 260 billion dollars between 2003 and 2008.
Maximo Torero, director of the Markets, Trade, and Institutions Division at IFPRI and co-author of the GHI report, said speculation in the food commodities market is excessive.
"In the case of wheat you have people trading for three times the production of wheat," Torero told IPS.
He said the problem arises when investors enter and exit the market for short-term profit without ever making a real transaction. According to Torero, only two percent of transactions are ever realised in the food futures market. The situation is one that needs more regulatory measures, he said.
Increasing and excessive food commodities speculation coincides with an ongoing boom in biofuels. As the WHI report points out, the United States and European Union are subsidising biofuel production as an alternative to crude oil. This is encouraging farmers to shift their production to biofuel crops, such as maize, that never make it to the dinner table. Global biofuel subsidies reached 20 billion dollars in 2009, according to the GHI.
Torero said that when more food crops go to biofuel production in the United States, it affects the amount of crops that can be exported to other countries. This has an impact because the United States accounts for about 50 percent of all global corn exports. As the GHI points out, an increasing link between the energy market, which is highly volatile, and the food market, is also making prices more volatile.
Furthermore, extreme weather events such as droughts and floods, which may increase due to even very small changes in the global climate, have the potential to decimate crop yields, further raising food prices. The poor are hard-hit by food price spikes and volatility, especially in low-income countries where families spend a majority of their income on food, the report stresses.
The GHI presents several policy recommendations to address food price volatility and increases by "revising biofuel policies, regulating financial activity on food markets, and adapting to and mitigating climate change". It also urges countries to improve social services and invest in "sustainable, small-scale agriculture".
Other voices are calling for a dramatic re-examination of global food supply chains to make them shorter and more geared toward local needs. Olivier De Schutter, the United Nations Special Rapporteur on the Right to Food, has advocated for sustainable, small-scale agriculture under the banner of "Agroecology".
"International trade only concerns nine to 10 percent of the food that is produced globally, yet it has had decisive influence on the way decisions are made on the way infrastructure develops and on how farmers are being supported," DeSchutter told IPS earlier this year. "Governments have generally supported export-led agriculture, supported global supply chains, and under-invested in local and regional markets."
He said he encouraged governments to reinvest in agriculture that feeds local populations. Instead, he said small farmers around the world were being ignored by public policies, migrating to cities, and eventually ending up in poverty and eating heavily-subsidised, cheap, imported food.
DeSchutter told IPS, "It's a vicious cycle in which small farmers are further impoverished because they can't compete - that's why we have one billion hungry."
*With additional reporting by Kanya D'Almeida.
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10 Comments so far
Show AllThe energy needed to support mass transportation can not be grown and that includes horses. It's folly, it's a capitalist ruse.
It has nothing to do with the crops ever being used for biofuel, and everything to do with the government subsidies that have been set up for years to benefit corporate farms and no one else. The subsidies were introduced in 1978. How many ethanol pumps do you see around? That's been a long research and development period.
"He said the problem arises when investors enter and exit the market for short-term profit without ever making a real transaction. According to Torero, only two percent of transactions are ever realised in the food futures market. The situation is one that needs more regulatory measures, he said."
You think regulation might be a good idea in this case?
How many people have to die from hunger or the other factors resulting from the unbridled greed of a minority, before we reexamine our unrealistic and manipulated fear of the term "regulation"?
Wow, I almost ended my post with,
"How many people have to die."
Corn as a biofuel produces 1.3 btu's for every btu of input.
Factoring in that the input is fossil fuels,
it is an environmental travesty.
Here are a few thoughts on this: It is best to have some regulation on this to avoid the possibility of a couple of fund managers being able to move the market significantly. Regulations were scaled back somewhat a few years ago. Perhaps too much? It is also true that a large number of people will speculate on markets and that's ok. Gold prices have gone through the roof due to wide-spread speculation. When it comes to food prices we certainly do not want food so cheap that we are overly wasteful and run out of food. That is a worst case scenario. In my farm shop I have a corn burning stove that is no longer in use because the price of corn is now 4 or 5 times higher than it was a few years ago. The subsidization of bio-fuels needs to end. This policy leads to higher food prices, and extra-ordinary farm practices to gain additional yields. These farm practices often include additional erosion and increased usage of fertilizers and pesticides, leading to degradations and lowered sustainability.
It's reductionism to focus exclusively on commodities market regulations, minimizing measurable trends which create scarcity of crops and farmland such as biofuels cultivation, drought and flooding.
For some reason, people find it cognitively appealing to say "It has nothing to do with A, it's only B" or vice versa. This single cause reductionism portrays a neat, tidy model which has nothing to do with reality, in which both A and B (as well as C and D) are causes.
Of course people should not starve because of the whims of commodities traders. But there is a finite amount of arable land on Earth, and mankind has already cultivated nearly every last bit. If we switch some of that land from food to biofuels, there will be less food. If climate change dries out or inundates farmland, there will be less food.
I have an idea. If bloody derivatives in bloody food commodities, has been shown to be having some effect on artificially driving up the cost of food, and since we know that the rest of the alphabet soup is also driving up the price of food, then I dare say, it would make sense to eliminate the bloody food commodities based derivatives.
If A, B, C, and D make bad on food prices......and A can be eliminated, whereas B, C, and D, aren't as easily addressed, then call me crazy, but wouldn't it make sense to eliminate A?
Pssssst! Its all about a few people making lots of money, don't you know.
There's nothing necessary or inevitable about devoting farmland to biofuels production. In fact, there's a chance that whole idea might have something to do with profiteering as well. There's more money in fuel for rich people than in food for poor people, don't you know.
Why would commodities trading systems be easier to eliminate than governmental biofuel mandates? The biofuels market is completely artificial, thus easier to terminate. The low-hanging fruit here is the biofuels market.
It's a good idea to do something about A and B, and also to take C seriously for once and even to get started on D. We have too many problems to limit ourselves to addressing them one at a time. That's the problem with reductionist thinking.
biofuels?
http://www.youtube.com/watch?v=L7MdnFt1UrI
Common Dreams seems tp have a policy of ignoring what is happening in Honduras, apart from reporting some drivel about disagreements between factions of the oligarchy. But there is a horrific repression of campesinos going in in the lower Aguan river region, where the oligarch Miguel Facusse is using his mercenary army, the local police, and the Honduran army to drive peasants off the land that he stole in the nineties so he can grow oil palms. An organization called Rights Action (rightsaction.org) has been reporting on the situation, but Common Dreams does not deign to carry their information. Here is a recent dispatch, only one of an ongoing stream. Why does Common Dreams ignore this situation? I wish I knew..
ARTICLE FROM RIGHTS ACTION.At Least 8 Campesinos Killed in Two Months as Violence Escalates in Honduras' Bajo Aguan Region..(Annie Bird, Rights Action co-director, 202-680-3002, annie@rightsaction.org)..On September 29, Miriam Enelda Fiallo and her husband German Castro, president of the Prieta cooperative in the Aguan, were driving in a pickup when a gunman opened fire on them with an automatic weapon. As she died, Miriam told her husband she loved him and asked him to take care of their children. German is struggling to stay alive with both lungs perforated...A week later, on October 5, two members of MUCA (Unified Campesino Movement of the Aguan), Alfredo Matamoros and Jarel Sanchez, were gravely wounded by shots fired on their passing car from the San Isidro palm plantation controlled by Dinant Corporation...Jarel Sanchez is in critical condition, and it was reported gunmen came to look for him in the hospital, the same hospital where German Castro struggled to stay alive. To prevent their murder in the hospital both men had to be moved in ambulances by human rights activists...XATRUCH MILITARY-POLICE "SECURITY" FORCE.Over the past two months violence has escalated significantly in the Bajo Aguan región of Honduras as it has become the site of a military occupation by Honduran combined police and military forces, a joint task force Xatruch reportedly earlier deployed by Honduras to support US operations in Iraq...Xatruch's arrival overlapped with the final days of a 33 day training course for the Honduran military battalion based in the Bajo Aguan about non-conventional warfare given by US Army Rangers...Since the Xatruch Force entered the region on August 17, at least ten campesinos have been killed in death squad style killings, and at least three more gravely injured, two of those in critical condition. In addition, five people were massacred after their pick-up truck pulled out of a campesino camp on August 15, violence that apparently may have been intended for campesinos...Many others have suffered torture, kidnapping attempts, beatings and other violations...The Xatruch occupation was reportedly spurred by an incident on August 14 that involved the killing of five palm plantation security guards and one campesino, followed by a tremendous campaign of press reports and public officials' statements that varied between implicating campesinos in the killings and claiming that the killings were unrelated to land conflicts but were the work of an armed movement...Unreported in press are reports from local sources that the August 14 killings of security guards were carried out by soldiers that arrived during an eviction of campesinos by security guards. On September 16 a policeman was killed in another still not clarified incident...Government officials and palm oil businessmen claim the incidents were ambushes, intended given the pattern of killings over the past two years and how similar situations have developed in places like Colombia, however some fear that the incidents may even be false flag operations intended to criminalize campesinos and justify militarization...While press reports implicate and criminalize campesinos in these incidents, and barely report on the death squad style killings of campesinos, the police detective unit in charge of investigating the killings has been implicated in abuses...Though conflicts between campesinos and African palm oil businessmen date back to the mid 1990's when campesinos report that businessmen illegally took control of the campesinos' farms, death squads came into the picture after the June 2009 military coup, to date apparently killing over 50 campesinos...PARTIAL LIST of Recent Campesino Killings & Other Serious Acts of Repression Since the Xatruch II Operation Arrived in the Bajo Aguan Region. On August 21 Arnoldo Portillo, a member of the 5 de Enero Empresa Cooperative was found murdered by machete strikes and gunfire..
On August 21, 2011 Pedro Salgado, the president of the 5 de Enero Cooperative, and his wife Irene Licona, were murdered by machete strikes and gunfire..
On September 2, 2011 in the exit from the Las Marañones community Olvin David González Godoy, a member of the Empresa Campesina 21 de junio was shot and killed by several gunmen..
* On September 19, 2011 Bernabe Cruz, 16 years old, was taken by Xatruch forces during an attack on the Rigores community, he was tortured by his captors and then released..
On September 29, German Castro, president of the Prieta cooperative, and his wife Miriam Enelda Fiallo were traveling in a truck when attached with automatic gunfire, Enelda Fiallo was killed at the moment and German is in critical condition..
Continuing the Rights Action report from Bajo Aguan: On October 2, 2011 Carlos Humberto Martínez, a member of the La Lempira cooperative and the Movimiento Unificado Campesino del Aguan, MUCA was shot to death at approiximately 5 am close to his fields..
On October 4, Marco Tulio Paredes, a leader of the Movimiento Unificado Campesino (MUCA) from the community of Rigores was surrounded by Xatruch troops who attempted to kidnap and threatened to kill him. On September 15, 2011 Parades had been cited in a New York Times article advocating land reform..
On October 5, 2011 Alfredo Matamoros, treasurer of the La Aurora cooperative and Jarel Sánchez, both members of the Movimiento Unificado Campesino del Aguan, MUCA were gravely wounded when their car was shot at from gunmen inside a palm plantation the men's car was passing..
On October 6, 2011, Walter Nelin Sabillon Yanes of Rigores community reported being detained and tortured with electric shocks and a plastic bag over his head to induce near suffocation by Xatruch forces. On October 2, 2011 Carlos Humberto Martínez, a member of the La Lempira cooperative and the Movimiento Unificado Campesino del Aguan, MUCA was shot to death at approiximately 5 am close to his fields..So, why does Common Dreams ignore this situation? I have been to Honduras, and I have seen plenty of evidence to support the validity of this information. But Common Dreams has nothing to say about it. Why?