This is a guest blog post by George Gelber.
Headlines are once again linking the words “Food” and “crisis”. Drought and fires in Russia, floods in Pakistan, too much rain in Canada and worries about Australia have sent the price of wheat soaring, nothing like the peak of 431 dollars a tonne reached in 2008, but painful nevertheless. Egypt recently paid between $280 and $298 for different shipments of wheat. At the beginning of the year they would have paid $100 less per tonne.
Food riots in Maputo left 7 dead and over 200 wounded. “What’s new?”, you might say, food prices rise steeply and somewhere tempers will flare and people living on the harsh knife edge of poverty will buckle under the strain and take to the streets. Bread prices will also rise in our bakeries and supermarkets and people will complain, but our relative affluence takes the sting out rising prices.
It is poverty that makes people vulnerable and desperate. This should concentrate the minds of world leaders when they sit down in New York to review progress towards the Millennium Development Goals in just over two weeks time.
This crisis, affecting wheat only for the time being, also underlines how much we depend on a reliable global food system, in which different regions of the world can operate in equilibrium, with bad harvests on one region being balanced by good harvests somewhere else. Global markets play a role in this, smoothing peaks and troughs and calming prices.
But things change when the speculators move in. At the beginning of August, Glencore, the world’s largest wheat trader, urged Russia to declare an export ban so that they could re-negotiate their contracts on the basis of force majeure. According to a US Senate inquiry, commodity index traders bought more than 200,000 wheat contracts by mid-2008, helping to fuel the price spike. Can it be happening again? Glencore, shielded from investigation and EU regulation by Swiss secrecy laws, has since sold 120,000 tonnes of French wheat to Egypt at over $290 a tonne, with another $27 a tonne added on for transport.