''Risky and secretive' gambling on the price of coffee, cocoa and wheat is leading to unstable food prices and exacerbating poverty and malnutrition but creating billions of pounds for the banking sector.
Banks such Goldman Sachs are making huge profits by gambling on the prices of key commodity crops such as coffee, cocoa and wheat, according to the campaign group the World Development Movement (WDM).
By creating funds to allow investors to speculate on the price of food, in the same way they would invest in the shares of a company, banks are able to bet on the price of food.
However this is leading to higher and more volatile prices which make it more difficult for farmers to plan and invest and also lead to damaging price rises - such as those witnessed in 2007/8 - which hit the poorest families in less industrialised countries hardest.
Only last month, says WDM, the price of coffee jumped by 20 per cent in three days, after a trader called the bluff of hedge funds that had made millions by selling coffee contracts and betting on the price to fall. This left hedge funds scrambling to buy actual coffee beans, and the price shot up from the extra demand...
The biggest banks involved in the trading are Bank of America, Citibank, Deutsche Bank, HSBC, Morgan Stanley and JP Morgan. Goldman Sachs alone is estimated to have made more than $1 billion from commodities trading in 2009.
WDM's new report, 'The great hunger lottery', calls for limits to be set on the amount that bankers can bet on food prices and for an end to secretive trading...'
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