Getting Rich Off Food Shortages
According to Britain’s Independent, Barclays Bank made more than half a billion pounds (around $810 million – their fine for the LIBOR interest-fixing scandal was $450 million) in two years from speculating on food staples such as wheat and soya. Among UK banks, Barclays has the greatest involvement in food commodity trading and is one of the three biggest global players, along with the US banking giants Goldman Sachs and Morgan Stanley.
The extent of Barclays’ involvement in food speculation comes to light as new figures from the World Bank show that global food prices hit an all-time high in July, with poor harvests in the US and Russia pushing up the average worldwide cost of staples by an unprecedented 10 per cent in a month.
Barclays makes most of its “food-speculation” revenues by setting up and managing commodity funds that invest money from pension funds, insurance companies and wealthy individuals in a variety of agricultural products in return for fees and commissions. The bank claims not to invest its own money in such commodities.
In February Barclays Capital analysts admitted in a note to clients that speculation was pushing up prices (I think – it’s written in bankese, rather than English). According to the memo: “The second key driver is that commodity investors have begun allocating to commodities again after beginning 2012 heavily underexposed to the sector.” The other drivers listed were the “health of the global economy” and “weather and geopolitics”.
Read more here.