Stories About Bread: Financial markets and corporate power (Chapter 2)

Over the past twenty years, there has been a worrying trend towards rising and highly volatile food prices. 
 
These price fluctuations and increases are influenced by a variety of factors, including geopolitical conflicts, economic instability and speculative financial transactions.
 
This poses considerable challenges for both producers and consumers.

The trend towards rising and highly volatile food prices can be roughly traced back over the past twenty years. In 2022, Russia’s attack on Ukraine – both countries are key exporters of maize, oilseeds and wheat – fuelled a fear of shortages on the global food export markets.
 
This sent food prices, already on a high, to unprecedented levels, leaving many people forced to pay more to put ever less food on their tables. In 2022, almost 800 million people worldwide were affected by chronic hunger – a 15 percent increase compared to 2019.

Price increases were not exclusively driven by speculative financial investments, however. Rising prices for oil and gas had a significant impact as well, because food systems are highly dependent on a range of sectors – including fossil fuels.
 
The war and the sanctions on Russian gas pushed up costs for imported agricultural inputs, leaving many countries dependent on food imports facing a critical double strain.

Starting in the early 90s, financial markets were increasingly liberalised, and legislation passed by the Clinton administration in 2000 did much to fuel speculation in agricultural commodity futures.
 
Promising quick and large profits, the Commodity Futures Modernization Act encourages financial players to bet on rising or falling food prices. As a result, financial markets may compound an existing crisis.
 
In the first week following Russia’s attack on Ukraine, for instance, markets registered an influx of investments into agricultural commodities that previously would have equalled an entire month’s worth of investments.

There is another loop in the system. Market liberalisation also makes it easier for large corporations to concentrate their power. Currently, a handful of agricultural companies control as much as 90 percent of the global grain trade.
 
With hundreds of subsidiaries, this group, known as the ABCCDs – Archer Daniels, Bunge, COFCO, Cargill and Louis Dreyfuss – are involved in every niche of the supply chain from farm to fork.

They also own huge storage capacities, which allows them to hold back their stocks until prices have reached favourable levels.
 
Continue to Chapter 3