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Study: Speculators To Blame For Skyrocketing Food Prices

By Travis Waldron  

"Study: Speculators To Blame For Skyrocketing Food Prices"

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While Americans have focused on rising fuel prices over the past month, food prices around the world are also skyrocketing, outpacing the rate of inflation for other consumer products and threatening to create a price bubble for the third time since 2008. Food prices have increased 4.4 percent in the last year compared with a 2.9 percent rise for all consumer goods. Prices on products like coffee and peanut butter have risen as much as 27 percent.

And as with the spikes of 2008 and 2011, commodity investors and speculators are largely to blame, according to one study highlighted by Time:

The New England Complex Systems Institute released a study last week linking speculation in global commodity markets to rising food prices. The study indicates that spikes in food prices in 2008 and ’11 came largely as a result of investor speculation and increased ethanol conversion, in which corn is used for fuel rather than food. The authors expect another “food bubble” to occur by 2013, which “may lead to major social disruptions” on par with the riots and unrest in North Africa and the Middle East in 2008 and ’11.

Speculation on other commodities has also drawn recent attention. After blaming speculators for oil and gas price spikes in 2008 and 2010, experts are again pointing to “speculative money that’s flowed into gasoline futures contracts since the beginning of the year” for the current rise in fuel prices. As with the fuel spike, rising food costs could have a dampening effect on the recovery of the American economy while also triggering social disruptions around the world — rising food prices were a factor in the unrest that led to the Arab Spring, according to some analysts.

The study also blamed increased conversion of corn from a food product into ethanol used for fuel. Corn prices spiked to a record high in 2011, and the U.S. now uses more corn for ethanol than it does for food production, a practice that has been propped up by federal ethanol subsidies that have been targeted for elimination by bipartisan groups of lawmakers.

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