How Wall Street Drives Food Prices

I told you so just doesn’t seem to cut it.

For three years, Big Food and Big Oil have been pointing fingers at the ethanol industry attempting to blame us for driving up commodity prices.

In those three years, a series of credible government and academic studies have proven that ethanol’s use of grain has, at best, a minimal impact on grocery prices and that a variety of other factors – including marketing, transporting, fertilizer, weather, a weak dollar and the price of oil – have a much more significant impact on food prices globally.

Today, a global anti-poverty group, World Development Movement, drove this point home in its latest report, Broken Markets, which explicitly details how financial speculation drives food prices.

According to the report, “[t]he activity of financial speculators is overwhelming agricultural commodities markets, fuelling global food price inflation and hunger.”

The report shows in stark detail how the rise in financial speculation has turned commodity derivatives trading into a very lucrative business for banks and investors, the unintended consequence of which is a distortion of the natural function of agricultural markets.

The report also includes a detailed graphic which illustrates how the rise in financial speculation is driving up the costs of food; in just five years, speculation on food has nearly doubled from $65 billion to $126 billion.

These new findings, and the pile of already existing reports, data and studies on the issue, should put a dagger in the hearts of those special interest groups who seek to make ethanol a scapegoat for hikes in our grocery bills.

As we have always said, the idea of “Food-versus-Fuel” has always been and will always be nothing more than a myth.

We hope that this report will encourage others who have relentlessly perpetuated this untruth to admit their mistakes and put an end to this false debate.