Who’s Playing with Our Food?

by Kevin Kanarek on July 12, 2011

in business, economics, food, media, sustainability

Frederick Kaufman on Stability in the Global Food Supply

Food and economics are two topics that are central to Green21′s focus on sustainability. We know that a reliable food supply is essential to life, right up there with water, and that sustainability in any economic system involves matching supply with demand and incentivizing productivity as well as profits.

So we took notice of Frederick Kaufman’s article ”The Food Bubble” (Harper’s Magazine, July 2010) which tells how a crisis, similar to that which hit the U.S. housing market, had struck our food supply on a global scale.

Between 2005 and 2008, the price of wheat gradually rose, and then skyrocketed. “It was as if the price of wheat was generating its own demand. The more it cost, the more investors wanted to pay,” Kaufman writes. In the article, he goes on to show how the effect rippled across global food markets and increased the numbers of hungry people worldwide.

How did this happen? The story reads like a murder mystery, and Kaufman is pretty sure he’s found the culprit. It wasn’t lack of supply, or any one company that had cornered the market on wheat, but rather a kind of systemic malfunction. And it could happen again.

Check out the article, reproduced with permission here.  And stay tuned to the comments section below, where Frederick Kaufman will be offering some solutions.

{ 3 comments… read them below or add one }

Frederick Kaufman July 13, 2011 at 12:05 pm

Solutions are hard to come by here, but a couple of reforms in the global wheat trade can help settle the possibility of future, index-fund based bubbles. The most effective would be a United States grain reserve (much like the farmer-owned reserve we had during the Clinton years). This would allow us to settle roiled markets and stifle contango.

G20 Agricultural ministers have become interested in solving the problem of international wheat speculation, and are calling for Dodd-Frank type reforms internationally such as true and accurate reporting of grain reserves held in countries around the world; reporting over-the-counter swaps, so we can know who precisely is taking what position, when and where; and setting position limits for non bona-fide hedgers, so that international financial players cannot usurp the food market for their own gain. Above all, we need to make sure Congress funds Dodd-Frank, and continues the momentum of industry regulation and reform.

Laura Rosenthal July 15, 2011 at 12:12 pm

Complex problem, complex solution. If we all try to eat locally, prepare our own food rather than buy factory farmed and factory assembled food, will that make a difference? I’m wondering.

Roberta Fernandez July 15, 2011 at 10:58 pm

How about Farm Subsidies? They’re up for renewal in 2012, looks like an easy way to eat healthy, lose weight and save 30 billion dollars annually.

Maybe all those folks who say they want a balanced budget should take notice:
http://opinionator.blogs.nytimes.com/2011/03/01/dont-end-agricultural-subsidies-fix-them/

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