"Investors fleeing Wall Street's mortgage-related strife plowed hundreds of millions of dollars into grain futures, driving prices up even more."
Washington Post

So its official. The UN anounced Monday that food speculators were mostly to blame for the recent surge in food prices. Agrofuels and changes to diet no-doubt have a part to play, but as Vietnam moved to stop panic buying at the weekend, with the Prime Minister stating that food supplies for the country were more than adequate , its clear that markets have been artificially inflating prices. A special meeting of the heads of the UN's agencies, along with the WTO and World Bank has been called in Bern for later in the week to discuss sollutions to the crisis.

Since I started researching the subject , a couple of in-depth articles have appeared in the Washington Post and BusinessWeek/Spiegel Online. It’s good to see that not only have two instituions of the conservative press picked up on the story (finally) but  that they join the likes of hedge fund head George Soros (who ran the US’s second most profitable fund last year) in describing the speculation as a sympton of unfettered capitalism gone too far.
My flatmate from Oxfam did point out to me that higher food prices had an upside – the impoverished farmers, many of whom have faced tough tough years (like in India where suicide amonst small farmers is very high), would be seing increased income. If the money is shifting from the miners of precous metals to impoverished farmers, it can't be all bad. It makes sense as an argument, but not if it’s at the expensive of mass starvaion – otherwise we’ll see a return to feudal systems with rich landowners supporting the people working the fields who can barely afford the produce they grow.

"Cotton growers have been among the most vocal critics, having witnessed a baffling surge in prices over a few days in March. In one day, the price of cotton jumped 15 per cent despite reports showing cotton supplies were at near record highs."

Forgive me for this brief tangent from the world of film and pixels, but I've been compelled to pull myself away from an engrossing chat with the Hull Film people and write about something which seems pretty urgent right now.

Like a lot of you, I've been concerned about the news of the rise of food prices around the world - a near doubling in prices of some vital foods like rice and wheat - and the fact that the consequences could lead to an already undernourished majority of the world having access to half as much food as before.
"And we have a herd of market traders, speculators and financial bandits who have turned wild and constructed a world of inequality and horror... This is silent mass murder."
Jean Ziegler, U.N. special rapporteur What troubled me most, however, was the causes, and how things are escalating so fast. I appreciate that investment in agriculture has shrunk, that close to two billion acres of land has been put aside for Biofools and that a wealthier India and China are eating more meat (the global meat industry consumes enough food to feed the world twice over, and emits more CO2 than the entire car, aviation and transport industry put together). But it seemed like there must be something else heralding such rapid changes in price (a few weeks back the global price of rice skyrocketed 300% in one day). So I formed a theory, searched Google, and found that I'm not alone in this thinking. I should stress I have no economics training, and my understanding of global commodities and futures trading is next to nothing. But I still think it's worth sharing this as it's not getting as much press coverage as you would expect - and would welcome any feedback/criticism you can give.

Basically its long been known that the forces driving first the debt bubble and subsequent sub prime crisis wiping billions off the values of the world's major banks, was the trading of debt on financial markets. Likewise the crazy price of oil - $117 and rising has been pushed up by speculators (people who gamble on the future price of a stock or commodities). Then gold and other precious metals started to rise and also now are at record highs as people invest in these commodities on expectation of bigger returns.

"Dealing in foodstuffs these days gives higher returns than stocks or bonds or real estate. These dealers never actually see the soybeans or sorghum, a bit like the Third World poor, who don't see much of them either... Our pension funds have also been getting into commodity dealing. The security of our monthly cheque may now depend on a family in Burkina Faso paying a week's wages for a bag of rice. " Tom Shields, Sunday Herald

So it seemed a logical conclusion that with all these markets now being overvalued or unstable, that the traders who control the billions invested by the major financial institutions, and currently trying to minimise the losses from the current turmoil, would seek to move their money to a new profitable place. Could this be driving the rise in food prices? And if so, does that mean there are some immediate actions that governments, the WTO and IMF, etc, could take to ensure that we don't see the first increase in famine and childhood malnutrition (which debilitates for life) in 20 years ago. And not have our TV screens filled with pot bellied children struggling for a bowl of rice in a few months?

“I suppose that's just capitalism but it's jolly disappointing. If society looked down on these funds then perhaps it would make a difference.”
Sir Michael Darrington, Chair of Greggs the Bakers

In much of the world 40% to a half of the household income is spent on rice. If the price rises by 300% in one day, as it did a few weeks back, it means that a family can eat three times less rice. Malnutrition seems inevitable, which in children has life-long consequences. The potential for widespread famine is more likely than at any time in the last 20 years. Since 2000, prices of wheat, butter and milk have tripled and prices of rice, maize and poultry have almost doubled - with the majority of those increases happening in the last year. 

Even the Chairman of Greggs the Bakers, Sir Michael Darrington, has spoken out about grossly irresponsible behaviour of the speculators and asking for the public's widespread condemnation of the darkest side of capitalism?

"It is astonishing in the present situation that the international financial institutions and government regulators have done little to control or banish this parasitical and antisocial practice. The myth of the benevolent and ultimately impartial market prevails against all contrary evidence." International Herald Tribune

People once just speculated on stocks. The internet bubble was great fun for day traders and bedroom gamblers with a bit of knowledge wanting to make a fast buck. I did it with QXL a decade ago - I bought £500 of shares, doubled my money, sold all but 2 of them, and then saw them rise tenfold, before falling back.

"The futures market reinforced the consumption trend: with food inflation expected to continue, wheat appeared the safest bet for investors in the years to come--prior to its dramatic surge, wheat had shown less volatility than maize and soybeans."
(60% of wheat market owned by index funds) Forbes.comThe internet bubble burst, and the mortgage / debt bubble picked up. A few years ago this started to fracture, and seeing problems ahead, people moved to oil, which in turn rose four-fold. More recently as the problems with bad bank debt became more apparent (a trillion dollars lost, apparently, probably enough money to feed, house, educate and provide water and health for everyone in the world - at least pick up a third of the bill of Iraq ), traders managing billions of investors' money, shifted to speculating in gold and other precious and semi-precious metals. And now metals have seen their prices so inflated that they are also overvalued, with the last place for the trading addict (and it is like any addiction) is food speculation. Gambling on the price of food, and acting in such a way to push prices up in order to make huge gains in a short period of time. For some institutions this may be the only way to cover up the holes in their finances from the sub-prime crisis.

So when Egypt halted its rice exports because of falling stocks, speculators push up the cost of a ton of rice by 300%. India followed by limiting their rice exports heavily and waiting to see how high the price would go. Riots and civil disruption erupted worldwide, with the UN Peacekeeping force shooting at hungry rioters and getting shot at in Haiti (did that one make it to London Lite?). It was, if you may recall, the tripling in the price of rice in Burma, which triggered the monk's protests there last autumn.

Day traders, seeking a quick buck with no sense of consequence (or morality) have created the potential for widespread famine. As Anthoney Costello, director of the UCL institute of Global Health pointed out in frank terms, "the poorest households in the developing world, surviving on tiny fixed incomes, will be hungry right now. In a few months our TV screens will show the pot-bellies of children with kwashiorkor and the emaciated faces of mothers and children ravaged by malnutrition and infection. Many will die unnoticed."

"In a few months our TV screens will show the pot-bellies of children with kwashiorkor and the emaciated faces of mothers and children ravaged by malnutrition and infection. Many will die unnoticed."
Anthoney Costello, UCL  Intervention by the UN by handing out sacks of rice won't solve the problem - the rice will still be very expensive (as will the wheat, soya, grains, oil, etc), and the hungry will be in the hundreds of millions. It's the speculators and the same lack of regulation which led to the current sub prime crisis, the internet bubble, and the price in oil which needs to be stopped. And even the biggest fans of free trade and global capitalism are arguing massive caution. To quote Paris-based agro-economic think-tank and research body Momagri 

"free trade will not stabilize prices but will increase instability. Indeed, simulations based on the assumption of complete market free trade in 2008 show that large-scale crops and grains will see price volatility rise sharply, while cattle prices will collapse. In addition, unregulated free trade, by increasing the participation of financial speculators, will further intensify price volatility. This was demonstrated by a new groundbreaking indicator that links the percentages of financial speculators to the increasing volatility of agricultural prices.

I don't think they are even caring about social impact... their job is to make money... They're not going to be worried about repercussions somewhere else."
Gary Kaltbaum,
Hedgefund managerEven the owners of hedgefunds are alarmed by the merciless trading of those whose need for a short buck (perhaps to cover their loses on sub prime) blinds their vision to the suffering they are creating.

Other articles discussing this include this, this in the International Herald and Tribune, and this. For the record I should point out that one article by Brian Durrant in MoneyWeek argues against the claims that speculation is driving the rise in prices, tho he does recognise that activity in food trading has risen from $10bn to $142billion pa in the last decade. He argues it is down to more people eating meat in China and India and the rise of biofuels, and that it is a simple issue of supply and demand, suggesting the answer is greater trade liberalisation:

If the world today were a rational economic place, then regions such as the Gulf, which are energy rich but are food production constrained, would be investing their petrodollars in agriculture. On the other hand, the US is the world's biggest agricultural supplier, but has enormous energy demands. The rational solution would be for Saudi Arabians to buy farms in the mid-West. At the same time America would secure its energy needs in the most efficient manner by sending teams of Texans to Riyadh. But in practice, numerous controls prevent Saudi Arabians buying Mid-West farms and Americans owning Saudi oil wells...

Instead, mutual mistrust is rising. Gulf leaders are considering plans to desalinate sea water to plant wheat in the desert, while at the same time the US and Europe are trying to turn corn into fuel. It's the economics of the madhouse, but alas, these measures make sense in terms of narrow domestic politics. And the consequence of this surge in economic nationalism? Even more food price inflation."

An interesting point, but a digression - as UN Chief Ban Ki Moon told a conference this weekend :

"If not handled properly, this crisis could result in a cascade of others ... and become a multidimensional problem affecting economic growth, social progress and even political security around the world,"

Update 8pm, Monday :

MoneyWeek pointed out their link above was broken, now corrected.

I also see from the Evening Standard left on my train back to Glasgow that the IMF have spoken out on it today and Brown is holding a summit tomorrow. There is also an interesting piece of analysis in today's Times from Anatole Kaletsky which speaks in mysterious terms about the correlation between the announcement of bad news in the markets and the rise of food prices, claiming no-one knows why they are so linked.

"Why, then, has a global collapse in credit created a boom in commodity demand? The short answer is that nobody knows.
Anatole Kaletsky
The TimesMore intrigingly he matches the graphs of the rise of the Euro against the Dollar, against the rise in commodity prices, pointing out that the are almost exactly the same shape. My knee-jerk user-generated-economist theory would be that as currency speculators abandon the dollar in the face of sub-prime fallout that big institutions or investors whose wealth is tied to dollars are trying to offset their losses with investment in commodities, a 'safe haven' as people are always going to need to eat. As the dollar falls in value, no real wealth is lost if your billions in dollars of rice or wheat futures is rising by the same amount.

Could this really be a case of the world's poorest literally starving to death to clean up the mess left by some gung-ho and irresponsible banks and traders? 

(I promise film and media talk will soon resume. All images from Trading Places, which is a good introduction to the corrupt world of food commodities trading) 

Update 9am Thursday

 Business bible Business Week has republished an excellent article from Die Spiegel which acknowledged that "hedge funds and small investors bear some responsibility for global hunger... "The landscape has changed since the influx of large index funds. Fund managers seek to maximize their profits using futures contracts, and prices", says [long term grain trader Greg] Warner, "keep climbing up and up.""

"In mid-2006 Anderson was touting the "extraordinary profitability" of field crops from corn to soybeans. He was convinced that rising worldwide hunger would be synonymous with highly profitable— and dead-certain— investment bargains... These days, though, Anderson avoids the media... buying up rights to all photos of himself on the market."
BusinessWeek

PM Brown has agreed to rethink biofuels after a summit on the question. Jim O'Neill, chief economist at Goldman Sachs, admitted to the  Observer (only just seen this now) that rising demand from emerging countries, such as Brazil, India, China and Russia, explained some, but not all, of the price surge, which has seen the cost of wheat double in 12 months. 'I see so much focus on food, and it seems to be so trendy in the investment world,' he said. 'The underlying dilemma has been created by the wealth of the BRICs [Brazil, Russia, India, China] countries; but, for the past year or so, it's also been a major theme for financial institutions. The markets seem to me to have a bubble-like quality.'

US shops have started to ration rice, and the Latin American countries have grouped together and are looking at creating a distribution network "so we don't" in the words of Venezuala President Hugo Chavez "fall into the hands of intermediaries and speculators, which stop millions from receiving food."

Meanwhile a meeting of US Farmers and the US Commodity Futures Trading Commission, which regulates U.S. commodity markets, in the US led to some heated exchanges on Tuesday - and an agreement not to raise the investment limit on speculation as planned. 

"Sixty per cent of the current [wheat] market is owned by an index fund," said Tom Coyle, of the National Grain and Feed Association. "Clearly that's having an impact on the market."

From the article in the Globe and Mail

"Some producers blamed these large speculators for causing a disconnect between the value of a futures contract, and the underlying value of the asset is supposed to represent.

Cotton growers have been among the most vocal critics, having witnessed a baffling surge in prices over a few days in March. In one day, the price of cotton jumped 15 per cent despite reports showing cotton supplies were at near record highs.

Several cotton industry players urged the CFTC to investigate the price movements, and demanded that the regulator make speculators subject to the same rules as commercial players who buy and sell the actual commodities...

Given the current turmoil, the CFTC said yesterday it was not inclined to move ahead with controversial plans to raise investment limits for speculators. "I believe that before acting, this agency must be certain that additional speculative pressures will not exacerbate the anomalies we are experiencing in these markets," said CFTC acting chairman Walt Lukken. "It is critical that we understand the problem fully so we can get it right and ensure that the cure is not worse than the disease."

Submitted by Lucy Coogan:

The West Midlands may seem a million miles from Hollywood, but filmmaking talent is strong in the region and as more and more young filmmakers embark on what they hope will become a career, the need for support and advice is as vital as ever. But is there enough in the region? And is it meeting and fulfilling the needs of a growing community of filmmaking talent?

I recently heard from a music industry insider that Radiohead make some 80% of their income from touring, which opened up the question of why they put so much effort into packaging, selling and protecting albums. A question that has now been answered. Free from a record label after their six album deal with EMI had come to an end, one of the most revered bands of the last 20 years have taken the twin giant leaps into self-distribution and inviting downloaders to decide how much to pay for their new album (In Rainbows).

Thousands of buskers today make a living from an upturned hat, which - tho no DRM system can ever force people into filling, often they do.

Trust - it's a model that has supported musicians perhaps longer than any other system, and hundreds of thousands of buskers and touring musicians today make a living from an upturned hat, which - tho no DRM system can ever force people into filling - somehow they do. Magnatunes has already been using the 'pick your own price' system for a while, and despite having a minimum cost of £5 (unlike In Rainbows where there will be no lower limit), sees an average payment of around £8 (Magnatunes also have great licenses for filmmakers wanting to only pay for music rights *after* the film starts making money).

We've seen the publishing industry shift from a paid-for model for newspapers and magazines to free ad-supported distribution in less than a decade. The New York Times was set to make millions this year from pay-per-view articles, the management eventually decided it would make more from advertising in the long run and made everything free. Rumours abound that ft.com and WSJ.com are set to follow suit.

With Amazon now opening a 2 million song DRM-free store, making it easier than ever to pirate (if you are so inclined), the tide for music too seems to be shifting towards a more open trust-based situation. Inherently - as with life - the trust approach has a lot going for it, viewing people as decent until proven otherwise, and it is sufficient to support church collections, eBay and plenty more. 

Supercomputer HAL in 2001 A Space Odyssey would be upgraded to Windows Vista and instantly cheer up.

But film is that much more expensive than music or writing to produce, and it'd be foolish not to consider what if trust doesn't work? If so, and unless we are to adjust to watching only microbudget productions and demand that film professionals work for free, then we are presented with the nightmare scenario Orange has been taking great pains to illustrate over the past decade with its Film Funding Board cinema ads - the advertiser as film funder and script developer. In some ways its only a small step away from current practices where Spiderman is filled with Sony technology, or films eligible for British tax breaks have to have sufficient 'British elements'. But it would spell the end of big budget art films. Supercomputer HAL in 2001 would be upgraded to Windows Vista and instantly cheer up.

Danah Boyd, currently in the news over her blog-essay theory that Facebook vs MySpace represents a social divide, gave an insightful talk at Cannes 60 about the future of film consumption and the changing habits of young people's relationship to media. Thanks to OffBrand's Neil Maguire for the headsup - copied below. Danah's area of expertise is not so much film or technologoy as online social networks, and in between identifying the hits and misses from the film world's attempts to co-opt young people to market their films, she points out how while independent music is embraced by teenagers, indie film is not. Fair point and certiainly worth mulling over. Her arguments against DRM, in particular, present another reason why the current furore over the DRM on the new BBC iPlayer (finally set to launch on Windows on July 27) is worth considering. People don't want to put a full feature or even an entire Simpsons episode on their MySpace page - they want to stick that 10 second clip of Homer talking with his brain which makes them crack up like no-one else they've met in the offline world...

"By and large, we treat the Internet as another broadcast medium where you push content at people. In other words, we're still aiming to localize rather than to co-opt. A better way of conceiving it is as a public space where people want to pull content in to personalize it, identify with it, and share it. It is no secret that we're not yet sure how to monetize this practice, but efforts to stop it are like trying to build gigantic walls after planes were invented.

The audience of tomorrow is online. They're consuming video; they want to be consuming film. There's unbelievable room for innovation and creativity in this space. The technology is not stable and it never will be stable. Successful filmmakers will need to pay attention to the dynamics and optimize their strategies accordingly. We all know that agility in the presence of challenges results in good art.

1) Youth are online to hang out with friends... they use media to jockey for status and socialize with their peers.
2) Youth do not and will not consume media whole in a passive way.. the more they are able, the deeper they will engage. This means remix, chopping it and sharing it.
3) Building walls to stop deep engagement scares off fans and never actually closes the loophole.
4) It is time for the film industry to innovate rather than trying to control. Many new opportunities lie ahead."

"What's really amazing is that TV had the perfect test case, seeing the music business practically destroying itself and totally alienating their core fans for the past six or so years — and they look at that and say, 'Yeah, that's the way to go.' "
John Rogers

Piracy - no, not the eye-patch type, but the copyright infringement variety. Product piracy has been with us since the industrial revolution, but today it is most common in the distribution of music, films and television shows. Compared to the film and TV industries, those music bods have been there, done that, bought the t-shirt (or illegal download) and, nowadays, seen the video.

 But is piracy really the conquering invader we are warned about by industry propaganda or will it one day concede a dramatic surrender? How about, rather than a fight to the death, we work together for a cease-fire and a harmonious future? Piracy only thrives because there is a gap in the market, with consumers feeling their needs are not being met. They want it now, they want it cheap, they want it easy and they want as much as they can get - and finally some people are listening.

"We have lost the online equivalent of parks... where the limits on what we can reasonably say and do are set by society as a whole and not by the commercial interests of one company."

If almost every independent musician, and an ever increasing group of filmmakers have a MySpace page, assigning NewsCorp copyright in the process, are they all technically still independent?

MySpace and similar social networks can be a great way of getting noticed and networking, but what happens if you actually hit the big time?  Bill Thompson's latests BBC post refers to the recent case of Tila Tequila, who after amassing 1.5 million contacts on her MySpace page was prevented from offering links to buy her debut album through any provider other than MySpace's own service. MySpace pointed out that "we retain the right to block or remove content that violates our terms of use, including unauthorized commercial transactions".

"The unauthorized commercial transaction here was that Ms Tequila's profile included a widget - a small piece of code - that took visitors to the Hooka music service instead of the MySpace-approved Snocap. This egregious attempt to make money without giving a cut to News Corporation, MySpace's parent company, was duly noticed and punished."

If YouTube can show video that streams without jumping and stalling, why can't the brains of the BBC? Ever since I saw BBC Head of Innovation Matt Locke descibe the BBC's scary 'Creative Commons = collapse of society / DRM walled gardens = good', strategy at the B.Tween conference a few years back, I've been worrying about Auntie's web future, and the threats to its position as the greatest TV network on earth (cultural bias alert) by not 'getting' the way the web works. Cory Doctorow  at Boing Boing has, as usual, got there first today and said it better.  

"We've trained people to watch TV. You can't turn around after 70 years and say, you have to stop using the best new technology to get the best TV experience. The point of the BBC is to create compelling programming that educates, informs and entertains. At the end of the day, it's the same shows. Why should how you watch it make a difference? Cory Doctorow

Picture one future - all of the BBC's content available to access online, on-demand at any time for every UK license fee payer - who have of course funded the library's creation. It's a mouth watering prospect and one that Greg Dyke promised before his early departure. If 'license fees' were offered to anyone in the world who wanted to browse at leisure an archive that spanned from Planet Earth to Monty Python, the Beatles to Dr Who, The Office to Cathy Come Home - the new income would doubtless offset any drop in DVD sales, and probably the recent license fee freeze too. By then allowing, say, educators and artists to access this archive to produce teaching materials and new works (see Bill Bailey below), there could be a massive cultral explosion in the UK, not to mention anyone else with access.