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How Banks Cause Hunger

HOW BANKS CAUSE HUNGER THE ISSUE I How does speculation work? Banks and other financial speculators are betting on food prices in financial markets, causing dramatic spikes in the cost of food. For speculators, this can mean huge profits. But high prices for staple foods, such as wheat and maize, mean poor people around the world are going hungry and millions are being forced into deeper poverty. Originally created to help farmers deal with the uncertainty of growing crops, "futures contracts" enable farmers to sell their crops at a future date at a guaranteed price. Futures contracts can also be bought and sold by bankers and traders who have little or no involvement in the actual food being traded, but instead see deals as an opportunity to profit. I How does it affect food prices? There are a number of factors driving up food prices, such as the use of crops to produce biofuels. But these alone cannot explain the sudden spikes in food prices we have seen recently. Over the past ten years, financial speculators have come to dominate futures markets. By buying into the market and bet- ting on rising prices regardless of what is happening in the real world, they have pushed up futures prices. If futures prices go up, current food prices also go up, because food buyers and sellers look to the futures market as a guide. WHEAT CORN US$1,500 сосоA US$300 US$270 --------- --------- 1,000 tons 5.000 tons Due: 07/12/12 2,000 tons Due: 13/04/12 Due: 24/09/12 I World food prices have risen sharply I In five years financial speculation on food has nearly doubled $126 Financial speculation has driven food prices to record levels, contributing to the 2007 - 2008 global food crisis. In 2011, food prices are still soaring and reached a record peak in February. $108 $89 $84 $65 $55 2003 2004 2006 2007 2008 2009 2010 2011 2001 Value of financial assets in 2008 2011 food markets (US$ billion) I Financial speculators now dominate food futures markets 1996 2011 O Food traders 15 years ago the futures market was used mainly by food traders to insure themselves against price changes. Now financial speculators make up most of the market. Food traders Financial speculators Financial speculators I Banks are profiting from speculation on food Barclays Capital: US$540 million Goldman Sachs: US$1 billion Nine times the amount of aid provided by the UK for the famine in the Horn of Africa. Seven times the value of the European Union's international food aid programme. Banks make profits by taking commission for facilitating other investors' speculation on food futures markets and speculating with their own money. UK ald $101m Barclays Capital makes up to EU aid $14.3m Goldman Sachs makes up to US$1bn USS540m a year THE IMPACT Since poor households in developing countries spend most of their income on food, sudden price rises in staple foods can be catastrophic. I Having to spend more income on food can lead to: Malnutrition as less dairy, meat, fruit and vegetables are eaten in order to afford staples. 44 MILLION DRIVEN INTO EXTREME POVERTY BY RISING FOOD PRICES SINCE MID 2010. Increased burden on women to earn more money by taking up domestic work or risky employment such as sex work. I Proportion of income spent on food: Households using up savings, going into debt or selling assets they depend on, such as livestock. Families being unable to afford healthcare and education. 70% 13% Increased hunger with people having to skip meals. 田 回 田 Households in Poor households in developing countries developed countries WORLDWIDE IMPACT- OVER 1 BILLION (one in seven) people are now chronically malnourished. In Africa, that figure is one in three. HORN OF AFRICA MIDDLE EAST ASIA 10m: Individuals facing a severe 13%: Food price inflation in January 2011 in Syria 40%: Increased cost of a Dhaka food crisis across the Horn of Africa (Djibouti, Ethiopia, Kenya, Somalia and Uganda) 26%: Rise in food prices from March 2010-March 2011 in Iran, twice the rate of inflation resident's weekly shop from 2010-11, even with people buying cheaper foods like rice instead of more nutritious options 41%: Increase in of food in Ethiopia during May 2011 15%: Food price inflation in Indonesia, in early 2011 12: Number of people who died from exhaustion or in riots while queu- ing for subsidised bread in Egypt, during the 2007-8 food crisis 2 days' Cost to residents of Nairobi wages: slum Kibera of one person's weekly supply of the staple food, maize, following price increases in 2007-8 3.5m: Increase in number of people in poverty in Pakistan in 2010, mostly due to higher wheat prices THE SOLUTION Action is urgently needed to stop speculation driving up hunger and poverty. Effective regulation could make futures markets operate for the benefit of food producers and consumers everywhere. Central to solving the problem is a cap on the amount of food futures contracts that can be held by financial speculators, to prevent them from dominating and distorting the futures market. Thanks to campaigning, new rules are being considered in the US. The World Development Movement is leading the campaign to make the UK government back European proposals for effective regulation to tackle food speculation. Find out more about the issue and what you can do to stop banks betting on hunger: www.wdm.org.uk/hunger Twitter: #foodspeculation I Annual real food price indices have been deflated using the World Bank Manufactures Unit Value Index (MUV) rebased from 1990-100 to 2002-2004-100. World Development Movement Justice for the world's poor The World Development Movement campaigns against the root causes of poverty. Working in solidarity with activists around the world, we oppose injustice and challenge the policies and institutions which keep people poor. Sources: Agra Informa Ltd, BBC, Food and Agriculture Organization of the United Nations, guardian.co.uk, OCHA, World Bank Group, World Development Movement World food price index 2002 2005 9007 2007 6002 2010 HOW BANKS CAUSE HUNGER THE ISSUE I How does speculation work? Banks and other financial speculators are betting on food prices in financial markets, causing dramatic spikes in the cost of food. For speculators, this can mean huge profits. But high prices for staple foods, such as wheat and maize, mean poor people around the world are going hungry and millions are being forced into deeper poverty. Originally created to help farmers deal with the uncertainty of growing crops, "futures contracts" enable farmers to sell their crops at a future date at a guaranteed price. Futures contracts can also be bought and sold by bankers and traders who have little or no involvement in the actual food being traded, but instead see deals as an opportunity to profit. I How does it affect food prices? There are a number of factors driving up food prices, such as the use of crops to produce biofuels. But these alone cannot explain the sudden spikes in food prices we have seen recently. Over the past ten years, financial speculators have come to dominate futures markets. By buying into the market and bet- ting on rising prices regardless of what is happening in the real world, they have pushed up futures prices. If futures prices go up, current food prices also go up, because food buyers and sellers look to the futures market as a guide. WHEAT CORN US$1,500 сосоA US$300 US$270 --------- --------- 1,000 tons 5.000 tons Due: 07/12/12 2,000 tons Due: 13/04/12 Due: 24/09/12 I World food prices have risen sharply I In five years financial speculation on food has nearly doubled $126 Financial speculation has driven food prices to record levels, contributing to the 2007 - 2008 global food crisis. In 2011, food prices are still soaring and reached a record peak in February. $108 $89 $84 $65 $55 2003 2004 2006 2007 2008 2009 2010 2011 2001 Value of financial assets in 2008 2011 food markets (US$ billion) I Financial speculators now dominate food futures markets 1996 2011 O Food traders 15 years ago the futures market was used mainly by food traders to insure themselves against price changes. Now financial speculators make up most of the market. Food traders Financial speculators Financial speculators I Banks are profiting from speculation on food Barclays Capital: US$540 million Goldman Sachs: US$1 billion Nine times the amount of aid provided by the UK for the famine in the Horn of Africa. Seven times the value of the European Union's international food aid programme. Banks make profits by taking commission for facilitating other investors' speculation on food futures markets and speculating with their own money. UK ald $101m Barclays Capital makes up to EU aid $14.3m Goldman Sachs makes up to US$1bn USS540m a year THE IMPACT Since poor households in developing countries spend most of their income on food, sudden price rises in staple foods can be catastrophic. I Having to spend more income on food can lead to: Malnutrition as less dairy, meat, fruit and vegetables are eaten in order to afford staples. 44 MILLION DRIVEN INTO EXTREME POVERTY BY RISING FOOD PRICES SINCE MID 2010. Increased burden on women to earn more money by taking up domestic work or risky employment such as sex work. I Proportion of income spent on food: Households using up savings, going into debt or selling assets they depend on, such as livestock. Families being unable to afford healthcare and education. 70% 13% Increased hunger with people having to skip meals. 田 回 田 Households in Poor households in developing countries developed countries WORLDWIDE IMPACT- OVER 1 BILLION (one in seven) people are now chronically malnourished. In Africa, that figure is one in three. HORN OF AFRICA MIDDLE EAST ASIA 10m: Individuals facing a severe 13%: Food price inflation in January 2011 in Syria 40%: Increased cost of a Dhaka food crisis across the Horn of Africa (Djibouti, Ethiopia, Kenya, Somalia and Uganda) 26%: Rise in food prices from March 2010-March 2011 in Iran, twice the rate of inflation resident's weekly shop from 2010-11, even with people buying cheaper foods like rice instead of more nutritious options 41%: Increase in of food in Ethiopia during May 2011 15%: Food price inflation in Indonesia, in early 2011 12: Number of people who died from exhaustion or in riots while queu- ing for subsidised bread in Egypt, during the 2007-8 food crisis 2 days' Cost to residents of Nairobi wages: slum Kibera of one person's weekly supply of the staple food, maize, following price increases in 2007-8 3.5m: Increase in number of people in poverty in Pakistan in 2010, mostly due to higher wheat prices THE SOLUTION Action is urgently needed to stop speculation driving up hunger and poverty. Effective regulation could make futures markets operate for the benefit of food producers and consumers everywhere. Central to solving the problem is a cap on the amount of food futures contracts that can be held by financial speculators, to prevent them from dominating and distorting the futures market. Thanks to campaigning, new rules are being considered in the US. The World Development Movement is leading the campaign to make the UK government back European proposals for effective regulation to tackle food speculation. Find out more about the issue and what you can do to stop banks betting on hunger: www.wdm.org.uk/hunger Twitter: #foodspeculation I Annual real food price indices have been deflated using the World Bank Manufactures Unit Value Index (MUV) rebased from 1990-100 to 2002-2004-100. World Development Movement Justice for the world's poor The World Development Movement campaigns against the root causes of poverty. Working in solidarity with activists around the world, we oppose injustice and challenge the policies and institutions which keep people poor. Sources: Agra Informa Ltd, BBC, Food and Agriculture Organization of the United Nations, guardian.co.uk, OCHA, World Bank Group, World Development Movement World food price index 2002 2005 9007 2007 6002 2010 HOW BANKS CAUSE HUNGER THE ISSUE I How does speculation work? Banks and other financial speculators are betting on food prices in financial markets, causing dramatic spikes in the cost of food. For speculators, this can mean huge profits. But high prices for staple foods, such as wheat and maize, mean poor people around the world are going hungry and millions are being forced into deeper poverty. Originally created to help farmers deal with the uncertainty of growing crops, "futures contracts" enable farmers to sell their crops at a future date at a guaranteed price. Futures contracts can also be bought and sold by bankers and traders who have little or no involvement in the actual food being traded, but instead see deals as an opportunity to profit. I How does it affect food prices? There are a number of factors driving up food prices, such as the use of crops to produce biofuels. But these alone cannot explain the sudden spikes in food prices we have seen recently. Over the past ten years, financial speculators have come to dominate futures markets. By buying into the market and bet- ting on rising prices regardless of what is happening in the real world, they have pushed up futures prices. If futures prices go up, current food prices also go up, because food buyers and sellers look to the futures market as a guide. WHEAT CORN US$1,500 сосоA US$300 US$270 --------- --------- 1,000 tons 5.000 tons Due: 07/12/12 2,000 tons Due: 13/04/12 Due: 24/09/12 I World food prices have risen sharply I In five years financial speculation on food has nearly doubled $126 Financial speculation has driven food prices to record levels, contributing to the 2007 - 2008 global food crisis. In 2011, food prices are still soaring and reached a record peak in February. $108 $89 $84 $65 $55 2003 2004 2006 2007 2008 2009 2010 2011 2001 Value of financial assets in 2008 2011 food markets (US$ billion) I Financial speculators now dominate food futures markets 1996 2011 O Food traders 15 years ago the futures market was used mainly by food traders to insure themselves against price changes. Now financial speculators make up most of the market. Food traders Financial speculators Financial speculators I Banks are profiting from speculation on food Barclays Capital: US$540 million Goldman Sachs: US$1 billion Nine times the amount of aid provided by the UK for the famine in the Horn of Africa. Seven times the value of the European Union's international food aid programme. Banks make profits by taking commission for facilitating other investors' speculation on food futures markets and speculating with their own money. UK ald $101m Barclays Capital makes up to EU aid $14.3m Goldman Sachs makes up to US$1bn USS540m a year THE IMPACT Since poor households in developing countries spend most of their income on food, sudden price rises in staple foods can be catastrophic. I Having to spend more income on food can lead to: Malnutrition as less dairy, meat, fruit and vegetables are eaten in order to afford staples. 44 MILLION DRIVEN INTO EXTREME POVERTY BY RISING FOOD PRICES SINCE MID 2010. Increased burden on women to earn more money by taking up domestic work or risky employment such as sex work. I Proportion of income spent on food: Households using up savings, going into debt or selling assets they depend on, such as livestock. Families being unable to afford healthcare and education. 70% 13% Increased hunger with people having to skip meals. 田 回 田 Households in Poor households in developing countries developed countries WORLDWIDE IMPACT- OVER 1 BILLION (one in seven) people are now chronically malnourished. In Africa, that figure is one in three. HORN OF AFRICA MIDDLE EAST ASIA 10m: Individuals facing a severe 13%: Food price inflation in January 2011 in Syria 40%: Increased cost of a Dhaka food crisis across the Horn of Africa (Djibouti, Ethiopia, Kenya, Somalia and Uganda) 26%: Rise in food prices from March 2010-March 2011 in Iran, twice the rate of inflation resident's weekly shop from 2010-11, even with people buying cheaper foods like rice instead of more nutritious options 41%: Increase in of food in Ethiopia during May 2011 15%: Food price inflation in Indonesia, in early 2011 12: Number of people who died from exhaustion or in riots while queu- ing for subsidised bread in Egypt, during the 2007-8 food crisis 2 days' Cost to residents of Nairobi wages: slum Kibera of one person's weekly supply of the staple food, maize, following price increases in 2007-8 3.5m: Increase in number of people in poverty in Pakistan in 2010, mostly due to higher wheat prices THE SOLUTION Action is urgently needed to stop speculation driving up hunger and poverty. Effective regulation could make futures markets operate for the benefit of food producers and consumers everywhere. Central to solving the problem is a cap on the amount of food futures contracts that can be held by financial speculators, to prevent them from dominating and distorting the futures market. Thanks to campaigning, new rules are being considered in the US. The World Development Movement is leading the campaign to make the UK government back European proposals for effective regulation to tackle food speculation. Find out more about the issue and what you can do to stop banks betting on hunger: www.wdm.org.uk/hunger Twitter: #foodspeculation I Annual real food price indices have been deflated using the World Bank Manufactures Unit Value Index (MUV) rebased from 1990-100 to 2002-2004-100. World Development Movement Justice for the world's poor The World Development Movement campaigns against the root causes of poverty. Working in solidarity with activists around the world, we oppose injustice and challenge the policies and institutions which keep people poor. Sources: Agra Informa Ltd, BBC, Food and Agriculture Organization of the United Nations, guardian.co.uk, OCHA, World Bank Group, World Development Movement World food price index 2002 2005 9007 2007 6002 2010 HOW BANKS CAUSE HUNGER THE ISSUE I How does speculation work? Banks and other financial speculators are betting on food prices in financial markets, causing dramatic spikes in the cost of food. For speculators, this can mean huge profits. But high prices for staple foods, such as wheat and maize, mean poor people around the world are going hungry and millions are being forced into deeper poverty. Originally created to help farmers deal with the uncertainty of growing crops, "futures contracts" enable farmers to sell their crops at a future date at a guaranteed price. Futures contracts can also be bought and sold by bankers and traders who have little or no involvement in the actual food being traded, but instead see deals as an opportunity to profit. I How does it affect food prices? There are a number of factors driving up food prices, such as the use of crops to produce biofuels. But these alone cannot explain the sudden spikes in food prices we have seen recently. Over the past ten years, financial speculators have come to dominate futures markets. By buying into the market and bet- ting on rising prices regardless of what is happening in the real world, they have pushed up futures prices. If futures prices go up, current food prices also go up, because food buyers and sellers look to the futures market as a guide. WHEAT CORN US$1,500 сосоA US$300 US$270 --------- --------- 1,000 tons 5.000 tons Due: 07/12/12 2,000 tons Due: 13/04/12 Due: 24/09/12 I World food prices have risen sharply I In five years financial speculation on food has nearly doubled $126 Financial speculation has driven food prices to record levels, contributing to the 2007 - 2008 global food crisis. In 2011, food prices are still soaring and reached a record peak in February. $108 $89 $84 $65 $55 2003 2004 2006 2007 2008 2009 2010 2011 2001 Value of financial assets in 2008 2011 food markets (US$ billion) I Financial speculators now dominate food futures markets 1996 2011 O Food traders 15 years ago the futures market was used mainly by food traders to insure themselves against price changes. Now financial speculators make up most of the market. Food traders Financial speculators Financial speculators I Banks are profiting from speculation on food Barclays Capital: US$540 million Goldman Sachs: US$1 billion Nine times the amount of aid provided by the UK for the famine in the Horn of Africa. Seven times the value of the European Union's international food aid programme. Banks make profits by taking commission for facilitating other investors' speculation on food futures markets and speculating with their own money. UK ald $101m Barclays Capital makes up to EU aid $14.3m Goldman Sachs makes up to US$1bn USS540m a year THE IMPACT Since poor households in developing countries spend most of their income on food, sudden price rises in staple foods can be catastrophic. I Having to spend more income on food can lead to: Malnutrition as less dairy, meat, fruit and vegetables are eaten in order to afford staples. 44 MILLION DRIVEN INTO EXTREME POVERTY BY RISING FOOD PRICES SINCE MID 2010. Increased burden on women to earn more money by taking up domestic work or risky employment such as sex work. I Proportion of income spent on food: Households using up savings, going into debt or selling assets they depend on, such as livestock. Families being unable to afford healthcare and education. 70% 13% Increased hunger with people having to skip meals. 田 回 田 Households in Poor households in developing countries developed countries WORLDWIDE IMPACT- OVER 1 BILLION (one in seven) people are now chronically malnourished. In Africa, that figure is one in three. HORN OF AFRICA MIDDLE EAST ASIA 10m: Individuals facing a severe 13%: Food price inflation in January 2011 in Syria 40%: Increased cost of a Dhaka food crisis across the Horn of Africa (Djibouti, Ethiopia, Kenya, Somalia and Uganda) 26%: Rise in food prices from March 2010-March 2011 in Iran, twice the rate of inflation resident's weekly shop from 2010-11, even with people buying cheaper foods like rice instead of more nutritious options 41%: Increase in of food in Ethiopia during May 2011 15%: Food price inflation in Indonesia, in early 2011 12: Number of people who died from exhaustion or in riots while queu- ing for subsidised bread in Egypt, during the 2007-8 food crisis 2 days' Cost to residents of Nairobi wages: slum Kibera of one person's weekly supply of the staple food, maize, following price increases in 2007-8 3.5m: Increase in number of people in poverty in Pakistan in 2010, mostly due to higher wheat prices THE SOLUTION Action is urgently needed to stop speculation driving up hunger and poverty. Effective regulation could make futures markets operate for the benefit of food producers and consumers everywhere. Central to solving the problem is a cap on the amount of food futures contracts that can be held by financial speculators, to prevent them from dominating and distorting the futures market. Thanks to campaigning, new rules are being considered in the US. The World Development Movement is leading the campaign to make the UK government back European proposals for effective regulation to tackle food speculation. Find out more about the issue and what you can do to stop banks betting on hunger: www.wdm.org.uk/hunger Twitter: #foodspeculation I Annual real food price indices have been deflated using the World Bank Manufactures Unit Value Index (MUV) rebased from 1990-100 to 2002-2004-100. World Development Movement Justice for the world's poor The World Development Movement campaigns against the root causes of poverty. Working in solidarity with activists around the world, we oppose injustice and challenge the policies and institutions which keep people poor. Sources: Agra Informa Ltd, BBC, Food and Agriculture Organization of the United Nations, guardian.co.uk, OCHA, World Bank Group, World Development Movement World food price index 2002 2005 9007 2007 6002 2010 HOW BANKS CAUSE HUNGER THE ISSUE I How does speculation work? Banks and other financial speculators are betting on food prices in financial markets, causing dramatic spikes in the cost of food. For speculators, this can mean huge profits. But high prices for staple foods, such as wheat and maize, mean poor people around the world are going hungry and millions are being forced into deeper poverty. Originally created to help farmers deal with the uncertainty of growing crops, "futures contracts" enable farmers to sell their crops at a future date at a guaranteed price. Futures contracts can also be bought and sold by bankers and traders who have little or no involvement in the actual food being traded, but instead see deals as an opportunity to profit. I How does it affect food prices? There are a number of factors driving up food prices, such as the use of crops to produce biofuels. But these alone cannot explain the sudden spikes in food prices we have seen recently. Over the past ten years, financial speculators have come to dominate futures markets. By buying into the market and bet- ting on rising prices regardless of what is happening in the real world, they have pushed up futures prices. If futures prices go up, current food prices also go up, because food buyers and sellers look to the futures market as a guide. WHEAT CORN US$1,500 сосоA US$300 US$270 --------- --------- 1,000 tons 5.000 tons Due: 07/12/12 2,000 tons Due: 13/04/12 Due: 24/09/12 I World food prices have risen sharply I In five years financial speculation on food has nearly doubled $126 Financial speculation has driven food prices to record levels, contributing to the 2007 - 2008 global food crisis. In 2011, food prices are still soaring and reached a record peak in February. $108 $89 $84 $65 $55 2003 2004 2006 2007 2008 2009 2010 2011 2001 Value of financial assets in 2008 2011 food markets (US$ billion) I Financial speculators now dominate food futures markets 1996 2011 O Food traders 15 years ago the futures market was used mainly by food traders to insure themselves against price changes. Now financial speculators make up most of the market. Food traders Financial speculators Financial speculators I Banks are profiting from speculation on food Barclays Capital: US$540 million Goldman Sachs: US$1 billion Nine times the amount of aid provided by the UK for the famine in the Horn of Africa. Seven times the value of the European Union's international food aid programme. Banks make profits by taking commission for facilitating other investors' speculation on food futures markets and speculating with their own money. UK ald $101m Barclays Capital makes up to EU aid $14.3m Goldman Sachs makes up to US$1bn USS540m a year THE IMPACT Since poor households in developing countries spend most of their income on food, sudden price rises in staple foods can be catastrophic. I Having to spend more income on food can lead to: Malnutrition as less dairy, meat, fruit and vegetables are eaten in order to afford staples. 44 MILLION DRIVEN INTO EXTREME POVERTY BY RISING FOOD PRICES SINCE MID 2010. Increased burden on women to earn more money by taking up domestic work or risky employment such as sex work. I Proportion of income spent on food: Households using up savings, going into debt or selling assets they depend on, such as livestock. Families being unable to afford healthcare and education. 70% 13% Increased hunger with people having to skip meals. 田 回 田 Households in Poor households in developing countries developed countries WORLDWIDE IMPACT- OVER 1 BILLION (one in seven) people are now chronically malnourished. In Africa, that figure is one in three. HORN OF AFRICA MIDDLE EAST ASIA 10m: Individuals facing a severe 13%: Food price inflation in January 2011 in Syria 40%: Increased cost of a Dhaka food crisis across the Horn of Africa (Djibouti, Ethiopia, Kenya, Somalia and Uganda) 26%: Rise in food prices from March 2010-March 2011 in Iran, twice the rate of inflation resident's weekly shop from 2010-11, even with people buying cheaper foods like rice instead of more nutritious options 41%: Increase in of food in Ethiopia during May 2011 15%: Food price inflation in Indonesia, in early 2011 12: Number of people who died from exhaustion or in riots while queu- ing for subsidised bread in Egypt, during the 2007-8 food crisis 2 days' Cost to residents of Nairobi wages: slum Kibera of one person's weekly supply of the staple food, maize, following price increases in 2007-8 3.5m: Increase in number of people in poverty in Pakistan in 2010, mostly due to higher wheat prices THE SOLUTION Action is urgently needed to stop speculation driving up hunger and poverty. Effective regulation could make futures markets operate for the benefit of food producers and consumers everywhere. Central to solving the problem is a cap on the amount of food futures contracts that can be held by financial speculators, to prevent them from dominating and distorting the futures market. Thanks to campaigning, new rules are being considered in the US. The World Development Movement is leading the campaign to make the UK government back European proposals for effective regulation to tackle food speculation. Find out more about the issue and what you can do to stop banks betting on hunger: www.wdm.org.uk/hunger Twitter: #foodspeculation I Annual real food price indices have been deflated using the World Bank Manufactures Unit Value Index (MUV) rebased from 1990-100 to 2002-2004-100. World Development Movement Justice for the world's poor The World Development Movement campaigns against the root causes of poverty. Working in solidarity with activists around the world, we oppose injustice and challenge the policies and institutions which keep people poor. Sources: Agra Informa Ltd, BBC, Food and Agriculture Organization of the United Nations, guardian.co.uk, OCHA, World Bank Group, World Development Movement World food price index 2002 2005 9007 2007 6002 2010 HOW BANKS CAUSE HUNGER THE ISSUE I How does speculation work? Banks and other financial speculators are betting on food prices in financial markets, causing dramatic spikes in the cost of food. For speculators, this can mean huge profits. But high prices for staple foods, such as wheat and maize, mean poor people around the world are going hungry and millions are being forced into deeper poverty. Originally created to help farmers deal with the uncertainty of growing crops, "futures contracts" enable farmers to sell their crops at a future date at a guaranteed price. Futures contracts can also be bought and sold by bankers and traders who have little or no involvement in the actual food being traded, but instead see deals as an opportunity to profit. I How does it affect food prices? There are a number of factors driving up food prices, such as the use of crops to produce biofuels. But these alone cannot explain the sudden spikes in food prices we have seen recently. Over the past ten years, financial speculators have come to dominate futures markets. By buying into the market and bet- ting on rising prices regardless of what is happening in the real world, they have pushed up futures prices. If futures prices go up, current food prices also go up, because food buyers and sellers look to the futures market as a guide. WHEAT CORN US$1,500 сосоA US$300 US$270 --------- --------- 1,000 tons 5.000 tons Due: 07/12/12 2,000 tons Due: 13/04/12 Due: 24/09/12 I World food prices have risen sharply I In five years financial speculation on food has nearly doubled $126 Financial speculation has driven food prices to record levels, contributing to the 2007 - 2008 global food crisis. In 2011, food prices are still soaring and reached a record peak in February. $108 $89 $84 $65 $55 2003 2004 2006 2007 2008 2009 2010 2011 2001 Value of financial assets in 2008 2011 food markets (US$ billion) I Financial speculators now dominate food futures markets 1996 2011 O Food traders 15 years ago the futures market was used mainly by food traders to insure themselves against price changes. Now financial speculators make up most of the market. Food traders Financial speculators Financial speculators I Banks are profiting from speculation on food Barclays Capital: US$540 million Goldman Sachs: US$1 billion Nine times the amount of aid provided by the UK for the famine in the Horn of Africa. Seven times the value of the European Union's international food aid programme. Banks make profits by taking commission for facilitating other investors' speculation on food futures markets and speculating with their own money. UK ald $101m Barclays Capital makes up to EU aid $14.3m Goldman Sachs makes up to US$1bn USS540m a year THE IMPACT Since poor households in developing countries spend most of their income on food, sudden price rises in staple foods can be catastrophic. I Having to spend more income on food can lead to: Malnutrition as less dairy, meat, fruit and vegetables are eaten in order to afford staples. 44 MILLION DRIVEN INTO EXTREME POVERTY BY RISING FOOD PRICES SINCE MID 2010. Increased burden on women to earn more money by taking up domestic work or risky employment such as sex work. I Proportion of income spent on food: Households using up savings, going into debt or selling assets they depend on, such as livestock. Families being unable to afford healthcare and education. 70% 13% Increased hunger with people having to skip meals. 田 回 田 Households in Poor households in developing countries developed countries WORLDWIDE IMPACT- OVER 1 BILLION (one in seven) people are now chronically malnourished. In Africa, that figure is one in three. HORN OF AFRICA MIDDLE EAST ASIA 10m: Individuals facing a severe 13%: Food price inflation in January 2011 in Syria 40%: Increased cost of a Dhaka food crisis across the Horn of Africa (Djibouti, Ethiopia, Kenya, Somalia and Uganda) 26%: Rise in food prices from March 2010-March 2011 in Iran, twice the rate of inflation resident's weekly shop from 2010-11, even with people buying cheaper foods like rice instead of more nutritious options 41%: Increase in of food in Ethiopia during May 2011 15%: Food price inflation in Indonesia, in early 2011 12: Number of people who died from exhaustion or in riots while queu- ing for subsidised bread in Egypt, during the 2007-8 food crisis 2 days' Cost to residents of Nairobi wages: slum Kibera of one person's weekly supply of the staple food, maize, following price increases in 2007-8 3.5m: Increase in number of people in poverty in Pakistan in 2010, mostly due to higher wheat prices THE SOLUTION Action is urgently needed to stop speculation driving up hunger and poverty. Effective regulation could make futures markets operate for the benefit of food producers and consumers everywhere. Central to solving the problem is a cap on the amount of food futures contracts that can be held by financial speculators, to prevent them from dominating and distorting the futures market. Thanks to campaigning, new rules are being considered in the US. The World Development Movement is leading the campaign to make the UK government back European proposals for effective regulation to tackle food speculation. Find out more about the issue and what you can do to stop banks betting on hunger: www.wdm.org.uk/hunger Twitter: #foodspeculation I Annual real food price indices have been deflated using the World Bank Manufactures Unit Value Index (MUV) rebased from 1990-100 to 2002-2004-100. World Development Movement Justice for the world's poor The World Development Movement campaigns against the root causes of poverty. Working in solidarity with activists around the world, we oppose injustice and challenge the policies and institutions which keep people poor. Sources: Agra Informa Ltd, BBC, Food and Agriculture Organization of the United Nations, guardian.co.uk, OCHA, World Bank Group, World Development Movement World food price index 2002 2005 9007 2007 6002 2010

How Banks Cause Hunger

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Banks and other financial speculators are betting food prices in financial markets, causing dramatic spikes in the cost of food. Higher prices for staple foods, such as wheat and maize, mean poor peop...

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