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Financial speculators could cause food prices to rise and drop drastically, putting millions of people all over the world at risk of hunger and poverty. People who live below the poverty line can spend up to 75% of their income just on making sure they have enough food to eat. MEPs in the European Parliament could put a stop to the unethical profit making from playing with wholesale food prices. MEPs vote for tough restrictions on food speculation.
Why is this important?
The greed of financial speculators helped to have provoke food riots in the past when the basics people need to survive, things like rice, wheat, sugar - became unaffordable. When speculators bet on food, prices are distorted. It is often the poorest who can go hungry and suffer the most.
Some of the biggest names in the financial sector are involved like Goldman Sachs, Morgan Stanley and Deutsche Bank , but also less well-known dealers such as Cargill. These firms dress up their greed by calling it “price developments” of “agricultural raw materials”.[1, 2] For each grain of wheat that is harvested, processed and eaten, these corporations sell it 99 times. [3]
Pressure from organisations and citizens from all across Europe led in 2014 to a EU directive, that limits food speculation. Only one more technical guideline is required and suddenly the European Commission is caving in after being pushed by the agricultural and financial lobby.
In two weeks the European Parliament has a chance to force the European Commission to act.. The vote on the food speculation guidelines is looking like it will be really close: we know that 40% of MEPs will back the clampdown, but we need to convince at least 84 MEPs who could swing the vote either way. In 2014 the vote was on the edge. We won back then. Now it’s on the edge again, so we must act now.
Here’s how the speculation works: Basic foodstuffs such as rice, wheat, maize or cocoa are traded on commodity exchanges.[4] Instead of prices reflecting supply and demand, hedge funds, banks and private investors flood the market, sometimes driving up the price of basic foodstuffs. When the price reach the crucial point they sell out and collect vast profits. But while the speculators celebrate with champagne, it’s those with the least that really pay the price.
The European Commission is proposing to allow countries to weaken the existing modest rules on food speculation even further. Under the Commission’s new proposals, nothing would really change. That’s why we have to convince the European Parliament to step up and end food speculation.
References:
[1] https://www.oxfam.org/en/research/not-game-speculation-vs-food-security
[2] http://www.foeeurope.org/sites/default/files/publications/farming_money_foee_jan2012.pdf
[3] Chicago Board of Trade, CBOT data from 11th of November 2016. Ratio between traded future volume and harvest for the year 2015 (year to date volume). Wheat: 5,542.06 mio. tons (traded volume at CBOT, Kansas, Minneapolis); 55.84 (US-harvest). Traded volume at exchanges is 99 times higher than US harvest. Researched by Oxfam Germany.
[4] https://www.oxfam.de/ueber-uns/publikationen/konzernatlas-2017
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Curb excessive food speculation
