Filed under: Commodities trading, hunger, the wheat market | Tags: algeria, biofuels, climate change, commodities, commodities trading, egypt, food prices, food riots, fuel prices, jordan, peak oil, political instability, population growth, speculation, staple crops, trading, tunisia, unrest, wheat prices
Over the past weeks / months, this blogspace has been largely populated by emails and a few letters from people that have done all these good deeds with the flour they’ve received from this project – bringing people together to enjoy a good meal, feeding others that are tired from work / studying, need of some inspiration, or just plain hungry. As great as these stories are, one could look at this blog and forget the impetus behind the Industrial Harvest project, and that’s not my intent at all.
If you need a reminder as to what this project is all about, all you need to do is look at the news. Food prices have continued to go up – right now, the price of food is higher than it’s ever been, even higher than the food price crisis in 2008. All that unrest in Tunisia and Egypt? It may be good for democracy, but it was largely fueled by anger at skyrocketing food prices, which in developing nations are more closely linked to commodities. In the Middle East and North Africa, wheat is the commodity of choice – Egypt is the world’s largest wheat importer. Algeria (the #4 global wheat importer) also saw food riots recently, along with Jordan. As a friend explained to me, wheat is a relatively small market (dwarfed by corn and soy) and therefore more vulnerable to price swings, and these places are highly reliant on that particular staple crop as a source of nourishment. Big problem – regardless of the regime that’s in place.
There’s no shortage of debate as to what’s making food prices go up. Some argue that it’s basic supply and demand: Global population is increasing and urbanizing – and as people in developing nations gain wealth, they consume more meat and more food and more land previously used for farming (as we in the “developed” world consume boatloads of everything, like we always have). So it is now more difficult to carry over a surplus of staples from year to year, and any uncertain weather or political event event that lowers expected yields will cause prices to spike.
Oh yeah, and those uncertain weather events? Things like floods, cyclones, droughts, wildfires, late freezes? There are more and more of those these days, thanks to global climate change, and they certainly impact the global food supply. Paul Krugman and Joseph Romm at Climate Progress have articulated this argument nicely. I can’t imagine it yields a lot of satisfaction for the climate scientists, who have been predicting these sorts of things for years, to be vindicated now.
And then there’s the price of fuel, which tracks closely with the price of food – industrially grown commodities require a large amount of energy to grow and transport. The Peak Oil crowd points out that as oil supplies decline, the prices of both food and fuel will go up even further. To make things worse, in our desperation for an oil substitute, we are dedicating a significant amount of food crops to producing biofuel.
Other folks point to the devaluation of the US dollar and Bernanke’s policy of “quantitative easing” as the root of the problem. Ironically, a cheaper US dollar in relation to other currencies drives up the demand for (and subsequently the price of) commodities.
Lastly, there’s the argument that the growth in commodity speculation has played a role – the financialization and deregulation of the commodities markets (along with the bust in the tech and mortgage derivative markets) have led to an explosion of commodity hedge funds, pension funds, index funds, derivatives, swaps, and on and on. All that nasty stuff that got us into trouble with the credit and housing crisis is now impacting the food system.
So are Wall Streeters disrupting the food supply in their desire to make a buck? Well, yes – I think they probably are, and yes, it’s part of the point of this whole Industrial Harvest thing. Frederick Kaufman’s excellent article for Harpers’ in July was what personally convinced me once and for all, but Kaufman is not the only one sounding the alarm. Some EU countries – primarily France – have recently spoken up in favor of stronger regulation of commodity markets. France, as the leader of the G20 this year, is poised to push this issue. The UN Food & Agricultural Organization (FAO) is right there with them. And all of a sudden, in the midst of all the hubbub around Egypt, a few mainstream news outlets seem to be starting to pick up the story as well. Better late than never, guys (see here, here and here).
Of course, it’s unrealistic to pretend that what’s going on with food prices is based on any single factor. Nor can I be 100% sure what’s going on. But, if someone asked me, I would sum up my view of the situation as increased demand and a host of other factors (climate events, biofuels, monetary policy, etc.) magnified by a pretty large and unstable speculative system, which is in turn driven by a few huge, powerful, vertically integrated corporations. This is all exacerbated by the fact that with markets it doesn’t matter what’s actually happening – it just matters what people think is happening – and what people think people think is happening (and so on). The fact that this house of cards could be brought down by any of, oh, 5 or 10 or 100 different and / or random events (or all of them, or some of them) is not only discomfiting. It also makes it easy for any single party to point the finger at the others, effectively diffusing responsibility, perpetuating ignorance and causing those who should care to throw up their hands in inaction and confusion.
Filed under: hunger, project updates, the wheat market, where the flour went | Tags: caribbean, flour, food insecurity, food prices, industrial harvest, jamaica
Back in August, I met N.,who came to the reception at Roots & Culture hoping to take some flour back to Jamaica to give away on an upcoming trip. She thought it would be a provocative commentary in that island nation, as the recent increases in food prices had had severe impacts on the people there. N. told me that the government just passes along price increases to the consumers, even though it has the power to do otherwise. Like many Caribbean nations, Jamaica could easily be self-sufficient in terms of food, as it’s blessed with a year-round growing season and many native sources of nutrients. But instead, it’s been sold down the river by corporations/governments focused on growing commodities (such as sugar cane) for export, undermining its food security – particularly in tough economic times like these.
So, together with the patient and flexible Mike Wolf, we arranged for N. to pick up a 50-lb bag from the Roots & Culture show and take it with her on the plane. I hadn’t heard from her much since, but I caught up with her when she came to the commodities trading session at Mess Hall. She broke the bad news to me: “It didn’t make it. I’ve got the day off on Thursday. I’ll come by and tell you the whole story.” Read what happened to her, in her own words, here – it’s a great lesson in creative adaptability under pressure.
Speaking of adaptability, check out the newly updated list of upcoming Industrial Harvest events. Both Mess Hall sessions have now been rescheduled for Oct. 10 (this coming Sunday, 11 am – 1 pm) and Oct. 24 (another Sunday, 3 – 5 pm). Join us!
Filed under: Books & reviews, Commodities trading | Tags: books, cari lynn, commodities trading, financial crisis, food prices, frank norris, frederick kaufman, goldman sachs, greedy pigs, harpers magazine, I.O.U., john lanchester, leg the spread, review, the pit
During the train trip out here, I read three books about greedy people.
Leg The Spread: A Woman’s Adventures Inside the Trillion Dollar Boys’ Club of Commodities Trading. Cari Lynn, Broadway Books, 2004.
Leg The Spread was fascinating, but not all I’d hoped. Lynn was theoretically a clerk on the floor of the Chicago Mercantile Exchange for two years, but seemed to have gotten the gig as a favor from a trader friend in order to do research for the book. At no point did Lynn seem to engage in any real trading activity. So the book wasn’t really a memoir, or maybe one that was concocted for the purpose of collecting other people’s stories. The stories are undeniably entertaining – largely about the insane things people do when they are at constant risk of losing it all or hitting the jackpot: throwing up and/or passing out on the trading floor, blowing 20 grand on a bed frame, wearing the same “lucky” tie for years on end, punching, shoving, spitting, all kinds of nasty dude stuff. Oh yeah, and the straight up sexual harrassment that occurs on the trading floor for the few women that can tough it out. But still, Lynn shies away from deeper critique of any kind and what is left is a rather random collection of others’ memories.
I.O.U.: Why Everyone Owes Everyone and No One Can Pay. John Lanchester, Simon & Schuster, 2010. This book was touted as a book on the financial crisis that was straightforward and funny, and while Lanchester is definitely clever, most of what he says made me too angry for any laugh out loud moments – even a chuckle seemed a little much. It’s a great big-picture, plain English explanation of everything that went down with the whole financial crisis, though, and because Lanchester is British, we get a broader perspective. Lanchester’s defining moment of scholarship is naming the fall of communism as the moment where the crisis began. As he describes it, the loss of any ideological foil for the capitalist countries meant that the capitalist countries were no longer subjected to critiques by the communist regimes, and no longer had to prove themselves able to take care of those on the bottom. As Lanchester puts it: “the jet engine [of capitalism] was unhooked from the ox cart [of social justice] and allowed to roar off at its own speed.”
The Pit. Frank Norris, 1903.
A few years ago I read Norris’ McTeague, a fantastic, dark novel about the San Francisco working class, which perhaps caused me to harbor higher hopes for The Pit than I should have. Rather romantic and predictable, the novel details the rise of a self made man who begins trading in wheat, gets good at it (spoiler alert, not that you wouldn’t see it coming anyway), corners the market and then loses it all. I probably would not have finished it were it not for my academic and historical interest in the topic, but it’s not all bad. Norris’ descriptions of the trading pits at the Board of Trade are quite similar to Cari Lynn’s 100 years later, and Norris does have a way of capturing the mood of a place and time. Unlike Lynn, Norris does not shy away from describing the consequences of futures trading on the people who eat the wheat, and those who grow it. This was back before the market was a god to be obeyed, before the economists had been elevated to high priest status. People actually questioned the ethics of such things.
Speaking of, I finally did find a copy of the long-sought after Harpers’ article (Fredrick Kaufman, July 2010: The Food Bubble: How Wall Street starved millions and got away with it). It’s a must read. Kaufman, who obviously knows his stuff, directly implicates Goldman Sachs (and other Wall Street firms, but Goldman leads the way) in the historic price run-ups in wheat and the resulting food price bubble in 2008. I’ve been reading about the wheat price bubble, and Kaufman’s explanation is the most cogent and detailed I’ve seen so far. And damning. Goldman developed the first commodities index fund, what could perhaps be described as a cousin of the derivatives that were the foundation of the mortgage crisis. Kaufman quotes several experts as saying that happened in 2008 (food price increases, starvation, food riots) will inevitably happen again. So the same firm that was behind all these people getting kicked out of their homes is also putting the price of food out of reach for many (in the US too, not just the global south). Why is manipulating prices of the things people need to survive (food, shelter) not criminal?
And, a postscript: a good portion of my train trip was spent in the lounge car adjacent to a young boy and his grandmother. The boy was pretty much a total brat, and spent much of the time yelling at his grandmother: “Give me all your money! All of it! I want candy! Give me the money! Give me all the money!” Funny, he didn’t look old enough to be a Goldman exec. And yes, she did eventually relent.