What is really driving up food prices?

    The US shoulders undoubtedly the main responsibility for the explosion of world agricultural prices and hunger riots because of its crazy objectives of biofuels production and because it is price maker for the world prices of grains, then for the prices the other exporting countries can charge. The EU claims it’s their responsibility to feed the world and points its finger at China and India as bearing a large responsibility in the explosion of world agricultural prices! This is laughable and distressing because it is the EU, even more than the US, which is actually receiving a massive net food aid from developing countries.
    The explosion by 120% to 190% in two years, from January 2006 to March-April 2008, in the prices of cereals and oilseeds cannot be explained only by the 19% fall in the world cereals’ stocks, by the 11% fall in the oilseeds’ stocks and by the 12% fall in the vegetable oils’ stocks – notably as a result of their use for biofuels – but by an amazing financial speculation which has magnified considerably the fluctuations and has leant on self-fulfilling expectations.
    We find again here the recurrent phenomenon of speculative bubbles having taken place on stock markets or real estate markets in several countries in the last 20 years. How to explain otherwise the surge in a single day of the rice price by 31% on 27 March 2008, from $580 to $760/tonne, or by 29% of the wheat price on the 25 February 2008?     According to the New York Times of 22 April 2008, “Prices of broad commodity indexes have climbed as much as 40 percent in the last year and grain prices have gained even more — about 65 percent for corn, 91 percent for soybeans and more than 100 percent for some types of wheat. This price boom has attracted a torrent of new investment from Wall Street, estimated to be as much as $300 billion”.
    However, as all the other speculative bubbles having occurred on the financial or real estate markets, the on-going one on agricultural commodities will end up bursting, the more so as the elasticity of food demand is very low so that a slight increase in world supply would trigger a collapse in prices.
    But the higher cost of production and transport of agricultural and food products linked to the soaring oil price will maintain the agricultural prices at levels significantly higher than those having prevailed before 2006.
    Therefore only rebuilding agricultural policies on food sovereignty without dumping (selling goods at lower than the production cost on international markets) will allow to overcome the challenges of a sustainable agricultural development at the economic, social and environmental levels. Finally, the World Trade Organisation needs to stop screwing over peasant farmers in Developing Countries and get the f*#k out of Agriculture.