I was doing my bit to help the West through its hard times and ate just one slice of bread and butter for breakfast instead of two. I did a lot of walking too. Western media and people like Condeleezza Rice and George Bush say that Indians are eating too much and India and China are using too much oil which is why global food and oil prices have gone through the roof. Plausible, since we have the largest number of people and two of the fastest growing economies on the planet. Until I read two articles. One was published by Fortune Magazine on 29 May 2006, written by two reporters Nelson D Schwartz and Jon Birger. The other was an article on the business page of one of our Goan papers last week on the oil and food crisis respectively.
The Fortune article named hedge funds and asset management companies in Paris, (Societe Generale Asset Management) Los Angeles (Pimco Commodity Real Return fund) and London (QCM) who were investing huge funds in oil. These funds were holding millions of barrels of crude for retirement nest eggs. There are stories and allegations cleverly placed in international mass media pointing the finger at India and China but way back in 2006 when oil prices began escalating the blame was laid squarely at hedge funds who poured billions of dollars into oil. There was no petrol shortage anywhere in the world the writers pointed out, no supply crunch, it was all due to hedge fund asset managers bidding on 'futures' contracts.
Hedge funds blame traders on the commodity exchanges. Even Western pension funds are putting their money into commodities. In 2005 Exxon Mobil $36 billion - more than any company in U.S. history - and it added another $8.4 billion in the first quarter of 2006. They ended the article with bracing words that the market will work to produce enough eco-friendly alternative energy fuels.
The food crisis article placed the blame squarely on the developed world which is blaming India for overeating. As the world grapples with the worst food crisis in recent years, firms like Cargill, Monsanto, Syngenta and Hong Kong based Noble Group are trading in grains and making huge profits.
Cargill, the US-based agri-business giant, which produces, stores and supplies foodgrains globally, had $88 billion sales and over $2.34 billion profits in 2007, 52 percent more than the previous year. In April 2008 Cargill announced that its profits from commodities trading for the first quarter of 2008 were up 86 percent over the same period in 2007. Syngenta is doing even better, with net profits of over $1.1 billion in 2007, up 75 percent over the previous year. US-based Monsanto and Syngenta are forcing the grain growing world to plant their genetically modified (GM) seeds, even though GM seeds have been accused of triggering crop failures and pest attacks. In 2003 Monsanto, one of the biggest suppliers of grain and vegetable seeds, with penetration round the world, was teetering with a loss of $23 million in 2003, but it made a whacking profit of nearly $1 billion in 2007. The Hong Kong-based Noble Group, listed in Singapore and involved in agri-commodities trade and transport, has seen a 95 percent jump in its profits in 2007.
GRAIN, a network of NGOs working for sustainable agriculture, says speculative investment in commodities futures has zoomed from $5 billion in 2000 to $175 billion to 2007. These include Louis Dreyfus of France, a private agricultural commodities trading firm with annual sales exceeding $22 billion, which does not report its profits.
The world needs food and the world needs oil. The party for the big players in the US, Europe and the developed world is just beginning with them trading between themselves and pushing the prices up, while the marginalized die away silently. So is India eating more? Or is it a clever ploy to divert the world’s attention from the rich nations trading in grain and food? Me? I’m eating two slices of bread ’n butter for breakfast with a vengeance. Let Bush and Rice feed off each other.