Financial speculators and the food crisis

Original source: DUBAI, 8 February 2009 (IRIN) - A food security expert has said that the involvement of financial markets in basic food commodities was the biggest factor in the worldwide food price hikes over the past couple of years.

Peter Timmer, a visiting professor at Stanford University, said in a video interview posted on the UN World Food Programme website on 6 February that financial speculation in important food staples created a ‘bubble’ that disconnected market prices from underlying supply and demand fundamentals and produced severe volatility.

He warned that prices might rise again. “If we see another shortage or drought for wheat or a virus in rice, or if we see a commodity shortage start to develop, I think we’ll see renewed interest [from financial speculators] and then we’d see the spiking again,” Timmer said.