Olly Zanetti: Food bets

Thanks to the World Cup, in the last month or so, the number of bets placed across worldwide have, I reckon, shot up wildly. From office sweepstakes and vaguely patriotic bets on home teams, to carefully thought out efforts to back a winner, almost everyone's been having a flutter.

But chipping a few quid into a pot here and there is hardly a world-changing activity, even if the predictions of a certain psychic octopus did upset the balance a little. However, while ordinary people are balancing goal-scoring stats, intuition and the octopus oracle, the bankers and City traders have been on a betting spree too.

Not content with having caused the biggest recession for generations, leaving the rest of us to pick up the pieces with rafts of public service slashing in the name of ‘austerity’, they've been messing with the food system too. The World Development Movement, a UK-based anti-poverty campaign group, has just released a report called Betting on Hunger. In it, they show how big companies have been trading so-called 'food futures' between each other. Essentially, they're trading pieces of paper that represent food that farmers haven't even grown yet. And by doing this, the price of basic foods is pushed skyward.

A futures market for food started life as a good idea. It meant that farmers could sell what they grew in advance at a guaranteed price. If the price was guaranteed, they had some assurance that they'd sell what they grew and with this, they wouldn't lose the value of everything on their land because world markets shifted overnight. After the world economy collapsed in the 1930s, rules were put in place limiting how these futures were traded. But as the economy heated up in the 1990s, these rules were relaxed.

Futures markets allow traders to speculate on the future prices of products, without ever getting hold of those physical products. Their price is essentially a bet on what the future value of something might be. But this bet has knock on effects for the price of products in the present. If a producer can see from futures markets that three months down the line his product will be worth more, they will either keep hold of it until then (thus reducing supply and pushing up the current price) or negotiate to be paid the higher future price immediately.

Even in the developed world, we've noticed the difference. In the past few years, a loaf of bread has gone from around 80p to £1.20. Big deal, you might think, an extra 40p a week isn't going to break most budgets. But elsewhere in the world, people aren't so lucky. In the developing world, many families spend almost everything they earn on food. If food prices rise by such massive margins (like between 2006 and 2008 when the world wheat price rose 110%) people are pushed into starvation. How many of us could cut our daily food intake by 50% without noticing?

And what's worse is that this food still exists. Sure, production has dropped a little in recent years because of low rainfall and land being used for growing biofuels instead of food, but there is still enough to go around. Food sits on shelves while the poor are denied access because they can't afford it. All this is just to make a few rich people even richer.

We shouldn't be complacent. As well as being morally despicable, this looks likely to affect all of us in future. With climate change kicking in, food prices are going to continue to rise and no one needs an extra unnecessary cost burden. There's also a principle at stake here too. Shouldn't these life essentials be regulated for the good of people not profit?

The World Development Movement is calling for people get in touch with their MP and demand answers. We should.

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Food bets (text) by Olly Zanetti is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.