WARNING: This is Version 1 of my old archive, so Photos will NOT work and many links will NOT work. But you can find articles by searching on the Titles. There is a lot of information in this archive. Use the SEARCH BAR at the top right. Prior to December 2012; I was a pro-Christian type of Conservative. I was unaware of the mass of Jewish lies in history, especially the lies regarding WW2 and Hitler. So in here you will find pro-Jewish and pro-Israel material. I was definitely WRONG about the Boeremag and Janusz Walus. They were for real.
Original Post Date: 2010-08-02 Time: 17:00:02 Posted By: News Poster
By Paul Redfern
Nairobi – In June of this year the price of coffee on the international market sky rocketed almost 20 per cent in three days, on the London Stock Exchange.
Initially, traders were baffled, as there had been no reports of a dramatic decline in harvests anywhere, nothing in fact to alter the steady process of trade which both consuming and producing nations still thought was primarily affected by supply and demand in the market.
Then it emerged that hedge fund speculators had been betting on lower coffee prices, artificially pushing the price down. However, their positions unwound when it emerged that one commodity trading house was holding several future contracts and intended to take physical delivery of the coffee.
Hedge funds were forced to buy back the contracts they had sold, triggering the sudden correction of a price surge. A commodities analyst, Sudakshina Unnikrishnan said that the coffee price spike was not linked to underlying supply and demand issues.
“There is no fundamental reason for coffee prices to have increased so much in recent weeks,” she said. Welcome to the world of futures trading, a world which has profound implications for African countries which are so dependent on their agricultural and cash crop sectors.
It is a world exposed in a new report by the UK-based charity, the World Development Movement entitled, ‘The great hunger lottery.’ WDM says the power of the futures trader is immense. Sometimes it can mean benefits and East African coffee producers have seen prices rise by up to 70 per cent between 2006 and 2008.
But most of all, it brings uncertainty for farmers and consumers, who in poor countries, cannot afford sudden massive fluctuations in prices for goods. The WDM report draws much of its findings from the period between 2007 and 2008, when there was a huge increase in the price of food and energy.
In that time the International Monetary Fund’s food price index increased by more than 80 per cent between the start of 2007 and the middle of 2008. Oil prices also rose to almost $150 a barrel. The impact was felt across the world.
In rich countries, consumers were paying more for food and energy. High prices contributed towards pushing countries into recession. And high levels of inflation led central banks into maintaining strict monetary policy whilst economies went into decline. The story of commodity prices is a key part of the recent financial crisis and economic difficulties, WDM says.
But across the developing world, the impacts were even more serious. Households in developed countries tend to spend between 10 and 15 per cent of their income on food, while poor households in developing countries spend between 50 and 90 per cent. High food prices left households spending a lot more money on food or eating less.
Combined with lower incomes due to the global economic slowdown, high food prices led to a rise in chronically malnourished people, increasing by 75 million in 2007 and a further 40 million in 2008. In its report WDM argues that part of the reason for the spike in food and other commodity prices was financial speculation.
It says that the number of derivative contracts in commodities increased by more than 500 per cent between 2002 and mid-2008. Between 2006 and 2008 it is estimated that speculators held 65 per cent of long maize contracts, 68 per cent of soyabeans and 80 per cent of wheat. The result is that in 2010 banks have come under fire for risky and secretive gambling on coffee, cocoa and wheat which is playing havoc with prices.
Even within the financial industry itself, this analysis is widely shared, the report says. As early as April 2006, Merrill Lynch estimated that speculation was causing commodity prices to trade at 50 per cent higher than if they were based on fundamental supply and demand alone.
George Soros told Stern Magazine that “every speculation is also rooted in reality… [however] Speculators create the bubble that lies above everything. Their expectations, their gambling on futures help drive up prices, and their business distorts prices, which is especially true for commodities. It is like hoarding food in the midst of a famine, only to make profits on rising prices. That should not be possible.”
For coffee and cocoa producers in Africa, they are uncertain which way the market will go next. Uncertainty affects investment and marketing and can lead to chaos as traders can no longer rely on the fundamentals of supply and demand. WDM says that the same banks, secretive hedge funds and dangerous speculation that caused the sub-prime mortgage crisis and global financial meltdown are also causing food prices to rise massively.
Although poor harvests were the initial trigger for price rises in cocoa, the finger is being pointed at hedge funds and big investment banks like Goldman Sachs for worsening the situation by speculating on food. WDM estimates that last year Goldman Sachs made $1 billion of profits from speculating on food.
The report says that “over the past decade, the world’s most powerful financial institutions have developed ever more elaborate ways to package, re-package and trade a range of financial contracts known as derivatives.
“A derivative is not based on an exchange of tangible assets such as goods or money, but rather is a financial contract with a value linked to the expected future price movements of the underlying asset.
“Derivatives trading has been one of the most lucrative parts of the financial industry, but it is the increasingly complex, opaque and disconnected nature of these and similar products that ultimately triggered the collapse of the banks and the worst financial crisis in human history.”
In The great hunger lottery, World Development Movement has compiled extensive evidence establishing the role of food commodity derivatives in destabilising and driving up food prices around the world. This in turn, has led to food prices becoming unaffordable for low-income families around the world, particularly in developing countries highly reliant on food imports.
Nowhere was this more clearly seen than during the astonishing surge in staple food prices over the course of 2007-2008, when millions went hungry and food riots swept major cities around the world.
The ‘great hunger lottery’ shows how this alarming episode was fuelled by the behaviour of financial speculators, and describes the terrible immediate impacts on vulnerable families around the world, as well as the long term damage to the fight against global poverty.
WDM warns that unless urgent steps are taken to clamp down on the banks, prices could get out of control.
Original Source: 
Original date published: 2 August 2010
Source: http://allafrica.com/stories/201008020987.html?viewall=1