The farm belt has been facing one of the severest droughts in its history and recent forecasts conclude that the next 3 months are going to make a bad situation worse. The situation has deteriorated to the point where hundreds of counties are being labeled disaster areas due to drought:
The U.S. Agriculture Department cited drought and heat on Wednesday in designating 597 counties in 14 states as primary natural disaster areas…
Drought shriveled crops across the farm belt, leading to an expected rise in food prices in 2013, according to USDA. It also turned forests of the mountain West into tinder stands that exploded into wildfires over the summer, scorching millions of acres and destroying hundreds of homes.
Meanwhile back on Wall Street, Goldman Sachs has been harvesting mighty profits from food shortages:
Goldman Sachs made more than a quarter of a billion pounds last year by speculating on food staples, reigniting the controversy over banks profiting from the global food crisis…
Goldman made about $400m (£251m) in 2012 from investing its clients’ money in a range of “soft commodities”, from wheat and maize to coffee and sugar, according to an analysis for The Independent by the World Development Movement (WDM).
This contributed to the 68 per cent jump in profits for 2012 Goldman announced last week, allowing it to push up the average pay and bonus package of its bankers to £250,000.
Now that is a fun redistribution of wealth. Drive the price of food up and pay the profits in bonuses to yourself. Starvation as a business strategy.
Wall Street apologists would like to point out that speculators have always been allowed to do this so the focus of solving the global food crisis should be solely on climate change and new innovations in the agriculture industry. While there is no doubt that climate change is the principal cause of the drought – NOAA says seven of the last ten years were the hottest in history – the resulting food shortage has been more severe due to speculators. And contrary to popular opinion this practice was not always allowed.
Since deregulation allowed the creation of the commodity funds that allowed many speculators to invest in agriculture for the first time, institutions such as Goldman have channelled more than $200bn of cash into the area. This investment has coincided with a significant and sustained rise in global food prices.
It’s good to know that not everyone will be suffering from the consequences of climate change, in fact, Wall Street will prosper.
Photo by Asa Mahat | Fortune Live Media under Creative Commons license