British Bank Makes $838 Million From “Food Speculative Activities”: Report

U.K. banking giant Barclays Plc has been accused of making as much as 529 million pounds ($838 million) over the last two years from speculating on food staples such as wheat and soy, claimed a report by The Independent on Saturday, with experts now warning of a “speculative bubble” that could cause further pain in an already enveloping global food crisis.

U.K. banking giant Barclays Plc has been accused of making as much as 529 million pounds ($838 million) over the last two years from speculating on food staples such as wheat and soy, claimed a report by The Independent on Saturday, with experts now warning of a “speculative bubble” that could cause further pain in an already enveloping global food crisis.

The Independent reported that Barclays was one of the three major players in food commodity trading, alongside Goldman Sachs and Morgan Stanley; and claimed that the British bank’s involvement only came to light after global food prices hit an all-time high in July.

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The report, citing research from the World Development Movement, also said that Barclays made up to 340 million pounds from food speculation in 2010 – as the prices of agricultural commodities such as corn, wheat and soya were rising – while the bank made a smaller sum (189 million pounds) as prices fell the following year.

“No doubt the UK’s biggest player in the commodities markets is hoping it will do better this year by cashing in on rising food prices,” said Christine Haigh, policy and campaigns officer at the World Development Movement and one of the analysts behind the research.

[quote]”Its (Barclay’s) behaviour risks fuelling a speculative bubble and contributing to hunger and poverty for millions of the world’s poorest people,” Haigh added.[/quote]

Last week, trading giant Glencore was also attacked for describing the present global food crisis and price rises as a “good” business opportunity. Analysts have warned that “food speculative activities” could help push basic prices so high that they may trigger a wave of riots in the world’s poorest countries, as staples drift out of their populations’ reach.

[quote]”The food market is becoming a playground for investors rather than a market place for farmers. The trend of big investors betting on food prices is transforming food into a financial asset while exacerbating the risk of price spikes that hit the poor hardest,” said Oxfam’s private sector adviser Rob Nash.[/quote]

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According to The Independent, Barclays have also attempted to circumvent accusations of food speculation in the past by setting up and managing commodity funds that invest money from pension funds, insurance companies and wealthy individuals in a variety of agricultural products in return for fees and commissions. The bank itself claims not to invest its own money in such commodities.

In the past, the bank has also tried to defended its actions, pointing out that trading in so-called futures contracts – an agreement to buy or sell a certain quantity of a product, at a given price on an agreed date – helped parties such as farmers and bakers to hedge against the risk of rising or falling prices.

“Our clients include investment companies, food producers and consumers who, among other things, seek our help to manage risks,” they said.

[quote]On Friday, a spokesman from Barclays added: “We recognise there is a perception held by some stakeholders that participation in agricultural futures markets by some participants can unduly influence the prices of commodities. As a result, we continue to carefully monitor market trends and any research produced on this subject.”[/quote]