The UN’s Food and Agriculture Organization has announced that the food price index has now broken a previous record set in 2008, when food prices nearly doubled over the course of 18 months, leading to popular upheavals in dozens of countries. Over the past year, the commodity food price index for corn has risen 52 percent, for wheat 49 percent and for soybeans 28 percent. Non-staple cash crops have also risen dramatically, with coffee up by 53 percent and cotton 119 percent.
The rise in commodity prices is not confined to agricultural products. Crude oil hit nearly $100 per barrel, and has increased in price by 26.54 percent from a year ago, when it was trading at $75 per barrel. Copper is up 30 percent in the same period. Increased energy prices are a factor that is further fueling the rise in food prices. The increasing use of ethanol, a corn-based alcohol, in producing gasoline in the US and elsewhere, is another factor that has cut into supplies of corn available on the food and animal-feed markets.
The rise in food prices globally is attributed both to a shortfall in production and a high degree of speculation in the commodities futures market. The biggest trading companies in agricultural produce are experiencing record profits from the price hikes. Cargill, the largest global trader of food commodities, saw its profits triple in the fourth quarter of last year, up to $1.49 billion from $489 million in 2009.
Various governments are claiming to take measures to control prices, but despite these measures, food prices continue to climb, as speculation in food commodities continues unabated. Many of the measures to control futures trading in agricultural commodities are little more than eyewash. For instance, the US Commodity Futures Trading Committee has proposed limits on the size of commodity bets taken by speculators, as part of the Dodd-Frank financial reform bill. The proposal will be voted on after a two-month “comment period.” There are clear indications that this is a publicity exercise and it will not be turned into a law.
While capitalist governments like to mainly blame unfavourable weather conditions, it is becoming clear that speculation in commodities is responsible for the extraordinarily high food price inflation. It is this that also explains the steep increase in the prices of oil and copper. In December 2010, it was revealed that a single anonymous investor controlled 90 percent of the copper supply in the UK, in an attempt to corner the market. While there are suspicions that either a US or UK based financial institution is behind the cornering of this supply, there is neither proof, nor is there any action to change this situation.
Two decades of unfettered expansion of international trade and the futures market has led to enormous concentration of trading capital, and a high degree of speculation and manipulation of commodity prices. Speculation in commodities has become a preferred option for finance capital to keep pocketing maximum profits even when there is no growth in production. According to the World Development Movement, more than $200bn has been poured into food markets since the 2008 financial crisis by speculators hunting for profit.
The capitalist class headed by parasitic profiteering monopolies, and the governments that do their bidding, are to blame for the unbearable food prices on the world scale. The working class and toiling majority of people of every country need to unite against the capitalist-imperialist system and fight to replace it with a system where food would be treated as an essential social need to be fulfilled as a matter of right. They must uncompromisingly fight for the immediate establishment of public procurement and public distribution of food, eliminating the space for private profiteering in this critical sphere of the economy.