Why Food Prices Are Increasing

Front page news in The Boston Globe today: Food prices going up, and why is that?  The author lists natural disasters, greater demand, and fuel costs spiraling, but what’s the real story?

Speculation.  The Guardian notes:  “Financial speculators have come under renewed fire from anti-poverty campaigners for their bets on food prices, blamed for raising the costs of goods such as coffee and chocolate and threatening the livelihoods of farmers in developing countries.  The World Development Movement (WDM) will issue a damning report today on the growing role of hedge funds and banks in the commoditiesmarkets in recent years, during which time cocoa prices have more than doubled, energy prices have soared and coffee has fluctuated dramatically.” http://www.guardian.co.uk/business/2010/jul/19/speculators-commodities-food-price-rises

Anecdotal reporting with farmers and consumers makes a good story, but it doesn’t get us any closer to identifying the causes of the problem.  Hedge funds and commodity traders operate with specious regulation.

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