Hedge funds ‘risk starving the poor’ with bets on food

Financial speculators have been accused of risking the starvation of the world's poorest people by betting on food prices as it emerged a London hedge fund has bought around seven per cent of global cocoa production.

Cocoa prices jumped to a 33-year high as Armajaro took delivery of 240,100 tonnes of the bean. A 150 per cent rise in cocoa prices over the past 18 months has forced some chocolate makers to increase prices or use less of the raw material in their wares.

The World Development Movement has now called on the Financial Services Authority to follow the United States and crack down on speculation in commodities.

In its report, 'The Great Hunger Lottery', it says financial bets on food prices have combined with poor harvests in recent years to increase the price of food for British consumers and cause food riots of the kind seen in Haiti and Mexico in 2008.

WDM's director, Deborah Doane, said: "Investment banks, like Goldman Sachs, are making huge profits by gambling on the price of everyday foods. But this is leaving people in the UK out of pocket, and risks the poorest people in the world starving.

"Nobody benefits from this kind of reckless gambling except a few City wheeler-dealers. British consumers suffer because it pushes up inflation, because of unpredictable oil and raw material prices, and the world's poorest people suffer because basic foods become unaffordable."

WDM claims Goldman Sachs made $1bn through speculating on food last year. Goldman, however, called the WDM's report "horribly misinformed on a number of fronts".

A spokesman said research by organisations such as the OECD showed food shortages were down to "long-term trends, including increased meat consumption by the growing middle class in the emerging markets and the increased use of biofuels in the developed markets".

Goldman say they are lobbying for "effective reform". Like other investors, they claim they bring stability to the food market and allow farmers to hedge against the risk of lower prices.

Read a full report at the Guardian. ·