World Unrest Linked To Food Prices
By James Donahue
There has been a common thread linking all of the protesting and demonstrating occurring
in the Middle East. Large numbers of people are not only out of work but even those that are employed can no longer afford
to buy food. As all Americans know well, the cost of food is rising. This is not just an American phenomenon. It is happening
all over the world.
MSNBC editorial commentators Ed Schultz and Dylan Ratigan took criticism when they blamed Wall
Street commodity speculators for driving up prices by buying up world supplies of wheat, corn, rice, oats, coffee, cocoa,
and other food commodities.
Schultz noted that in 1991 Goldman Sachs persuaded President George H. W. Bush and the Commodity
Futures Trading Commission to relax the rules for commodity trading set by Franklin D. Roosevelt in the 1930s.
From the published text in that November 1 show, Shultz said:
the real estate bubble? Wall Street wanted to hedge all of those bets it made on mortgages. So, they ramped up
their bets on commodities. And when Wall Street started losing money on subprimes, they bet it on commodities instead.
“By 2008, Wall Street had five times more futures contracts in commodities than it did
in 2002. Commodity indexes held about $13 billion in 2003. By 2008, it was over a quarter trillion. That‘s
how we got the oil bubble, and record high gas prices added to the cost of shipping food, plus speculators looking for another
bubble—and you get a food bubble.
“By 2008, the U.N. estimates speculators held 65 percent of corn futures contracts, 68
percent of soybean, 80 percent of wheat. By mid-2008, the IMF food price index jumped more than 80 percent in just a
year and a half.
“It was the first time in history the proportion of people going hungry worldwide went
up. The number of chronically malnourished people rose by 75 million in 2007, 40 million in 2008. That‘s
why Egypt had riots back in 2008.”
He said the situation appears to have become even more critical now as food prices continue to
rise. People in Egypt now exist on about two dollars a day, and eighty percent of what they earn now is spent on food.
Ratigan, who appeared on that show with Schultz, said another “sinister factor” in
the food pricing picture has been the practice by the Federal Reserve to print too much paper currency which is reducing the
value of the dollar. This, he said, is creating a false sense of financial security in the financial markets but is causing
the price of food and everything else to go up.
Columnist Noel Sheppard in the blog page “Newsbusters,” the following day criticized
both Schultz and Ratigan for not mentioning the fact that two key bills, the Financial Services Modernization Act of 1999
and the Commodity Futures Modernization Act of 2000 were both signed into law by former President Bill Clinton.
Sheppard wrote: “This is what completely deregulated banks, brokerage firms and insurance
companies to invest in anything they wanted, including commodities. Compounding
matters further, CFMA greatly added to commodities speculation the following year by not only completely deregulating derivatives
but also claiming the Commodities Futures Trading Commission had little to no oversight of overseas electronic exchanges such
as Britain’s InterContinental Exchange.
“As a result, there are no position limits on trades made on such exchanges, and practically
no reporting requirements thereby allowing traders to buy and sell as much as they want with virtually no restrictions,”
If you study the commodities market it is clear that the value of a bushel of corn or wheat is
going through the roof as speculators buy up these stored commodities in anticipation of future availability of food on the
With extreme weather changes, severe storms, floods and droughts in unexpected places, the speculators
are obviously betting heavily on crop failures in 2011. As the crisis in the Middle East intensifies, and the price of crude
oil rises, this also is surely having an effect on the cost of farming operations, trucking the produce to market and the
overall price of everything we buy at the grocery store.
People caught out of work, retired and living on fixed incomes and working at low income jobs are
in a financial pinch. They are forced to choose between paying for their homes and utility costs, or food. Forget medical
care. Getting sick is something most folks don’t dare to think about.