It will be a hungry summer for billions around the world as global food prices head to an all-time high. The prices of corn, wheat and soy have surged by 30 to 50 percent.
For the poorest people, who spend most of their income on food, the effect can be devastating. Now there are fears of a repeat of the 2008 food crisis, which led to protests and riots in more than 30 countries.
Egypt, India, Mexico and Morocco are among the countries that may struggle to import the corn and wheat their populations need.
The trigger for the current price surge is a severe drought in the US Midwest and dry weather in South America. These are two of the most intense crop producing regions in the world.
But this doesn’t tell the whole story. Despite the drought, there is no actual shortage of food in the world. In fact 2008 wasn’t just a year of crisis, but also of record production.
Part of the problem is made by food crops being diverted towards biofuels. Last year 40 percent of the US corn crop was used for ethanol fuel.
Another culprit is commodity trading. Barclays bank says this is one of the three “key drivers” of the price surge.
And Barclays should know—it is the biggest food speculator in Britain. It bets on food prices in the financial markets, such as by buying food up when it expects prices to rise to make quick cash.
This year more investors are moving billions of pounds back into the food price casino, hoping to cash in on the confusion about the weather.
“It’s like a giant money tap has been turned on,” according to senior fund manager Peter Sorrentino. And Barclays notes that this tap still has a long way to run.
Many of the worst hit countries were once food exporters themselves. But over the course of several decades pressures from the World Bank, International Monetary Fund and World Trade Organisation have changed this.
They forced many countries to abandon their subsidies and tariffs, leaving them at the mercy of imports from a few agricultural superpowers. This has created the absurdity of Mexico being reliant on imports from the US for the corn to make tortillas.
Currency prices will make these imports more expensive still. In 2008 the dollar was weak, but in now it is much stronger.
So while US corn prices are now 6 percent above the 2008 peak when measured in US dollars, this becomes a 21 percent rise in Egyptian pounds and a whopping 37 percent rise in Mexican pesos.
All the ingredients are in place for another food crisis bringing starvation to millions. It will be capitalism, not the weather, that is to blame.