The threat of rising food prices

This is as much a part of what’s wrong with our financial sector as the Greek and Irish debt crises.

While inertia continues to define the coalition government's approach to banking regulation, the bankers are happily enjoying yet another free-for-all spending splurge – and fears are emerging of a new bubble. This time, it's a commodity bubble, similar to the one that led to food riots around the world in 2007 and 2008.

In case you hadn't noticed, food prices are at an all-time high: the latest figures show food price inflation at 5.5 per cent, outpacing the overall inflation figure of 3.3 per cent. You'll be paying as much as 25 per cent more for your regular cuppa as tea prices rise; and we already saw the cost of our Christmas turkey go up by more than £3 before Christmas, due to the doubling in feed costs in 2010.

The Food and Agriculture Organisation's Food Price Index, released last week, shows that a range of basic food prices are actually higher than they were when food riots broke out in places like Mozambique, Egypt and Haiti just two years ago. In the first week of December, the benchmarked US wheat price reached $327 per tonne, which is a staggering 70 per cent higher than that for July 2010, just six months earlier.

Some market analysts would have us believe that it's a simple case of time-honoured supply and demand. But aren't these the same analysts who also said that mortgage derivatives were a good bet for investors? Market fetishists often fail to ignore the evidence as it suits them.

Although the long-term trends do point to a gradual rise in prices, due to a range of reasons from climate change and biofuel production to increasing consumption, basic supply and demand alone doesn't account for the high price volatility and huge changes being seen in recent months.

Price spikes of upwards of 70 per cent are being led by hedge funds, investment bankers and pension funds that have poured over $200bn into food markets since the financial crisis, betting on prices going ever higher. With few options to place your bets these days, and especially with the ready-made cash available through quantitative easing, food isn't a bad place to start – for the bankers, anyway.

A few extra pence for a loaf of bread doesn't seem like a lot to most of us, but the story is rather different if you're in a developing country, relying on imported staple foods just to get by.

Meanwhile, the replay of food riots began last week, with three people killed and 300 injured in disturbances that broke out in Algeria. For some of the poorest people in the world, as prices rise, education falls by the wayside; basic assets such as farm animals get sold, and a short-term crisis can lead to long-term chronic malnourishment for a generation.

Food isn't an asset like any other – it's fundamental to human life. Commodity markets exist to enable people to buy and sell food, but are now the best place for speculators to make a quick buck through murky "over-the-counter" trades and a self-fulfilling prophecy of ever-rising prices.

The story of food prices is as much a part of the picture of what's wrong with our financial sector as the Greek and Irish debt crises, or the obscene level of bankers' bonuses. The reality is that the same speculators who caused the global economic meltdown through their illustrious trade in sub-prime mortgages are now betting on our food system, too.

The issue has prompted the French president, Nicolas Sarkozy, to plan to raise the matter with Barack Obama later this week in Washington, as part of France's duties as leader of the G20.

So when the coalition government decides to ignore the evidence and turn a blind eye to regulating the banking sector, the result is inflation and ongoing volatility in financial markets, failing people far beyond our borders.

These markets need to be brought back under control, limiting excessive speculation, ensuring that markets are fully transparent, and not holding the rest of us to ransom through unnecessary and unscrupulous price rises.

Deborah Doane is director of the World Development Movement.

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PMQs review: Theresa May shows how her confidence has grown

After her Brexit speech, the PM declared of Jeremy Corbyn: "I've got a plan - he doesn't have a clue". 

The woman derided as “Theresa Maybe” believes she has neutralised that charge. Following her Brexit speech, Theresa May cut a far more confident figure at today's PMQs. Jeremy Corbyn inevitably devoted all six of his questions to Europe but failed to land a definitive blow.

He began by denouncing May for “sidelining parliament” at the very moment the UK was supposedly reclaiming sovereignty (though he yesterday praised her for guaranteeing MPs would get a vote). “It’s not so much the Iron Lady as the irony lady,” he quipped. But May, who has sometimes faltered against Corbyn, had a ready retort. The Labour leader, she noted, had denounced the government for planning to leave the single market while simultaneously seeking “access” to it. Yet “access”, she went on, was precisely what Corbyn had demanded (seemingly having confused it with full membership). "I've got a plan - he doesn't have a clue,” she declared.

When Corbyn recalled May’s economic warnings during the referendum (“Does she now disagree with herself?”), the PM was able to reply: “I said if we voted to leave the EU the sky would not fall in and look at what has happened to our economic situation since we voted to leave the EU”.

Corbyn’s subsequent question on whether May would pay for single market access was less wounding than it might have been because she has consistently refused to rule out budget contributions (though yesterday emphasised that the days of “vast” payments were over).

When the Labour leader ended by rightly hailing the contribution immigrants made to public services (“The real pressure on public services comes from a government that slashed billions”), May took full opportunity of the chance to have the last word, launching a full-frontal attack on his leadership and a defence of hers. “There is indeed a difference - when I look at the issue of Brexit or any other issues like the NHS or social care, I consider the issue, I set out my plan and I stick to it. It's called leadership, he should try it some time.”

For May, life will soon get harder. Once Article 50 is triggered, it is the EU 27, not the UK, that will take back control (the withdrawal agreement must be approved by at least 72 per cent of member states). With MPs now guaranteed a vote on the final outcome, parliament will also reassert itself. But for now, May can reflect with satisfaction on her strengthened position.

George Eaton is political editor of the New Statesman.