Bank: Profits Soar For Agribusinesses, Food Speculators While Poor Struggle

May 5, 2008 10:51 a.m. EST

Lahore, Pakistan (AHN) - Soaring profits for giant agribusinesses, their executives and stockholders are coming at the expense of the world's poor who increasingly can't afford to pay the increasing price of food, the Asian Development Bank announced Sunday.

Higher prices might undo a decade of gains in Asia and could throw millions of people back into poverty, regional leaders meeting during the bank's annual meeting said, according to Pakistan news reports. The leaders called for an increase in agricultural production to try to meet the soaring demand.

Escalating prices have come from several sources, including an increased demand for food and fertilizer generally. Also creating a tighter food supply is more grain used to feed animals to answer heightened demand in China and India.

Bank members also pointed to a growing world population coupled with diversion of food crops to produce biofuels.

Speculation may be another factor fueling high food prices and record profits for agribusiness.

A growing number of investors are turning away from the stock market and playing in the food futures market, driving prices up as food is now increasingly viewed as an investment to earn passive income from for the rich, instead of a basic necessity to sustain health and life.

Index-fund investment in grain and meat futures has increased almost fivefold in the past year, according to AgResource Co, a Chicago-based research firm, and amounted to over $47 billion in the past year, according to The Independent.

Worry over the effect of food speculation led to special hearings by the U.S. Commodity Futures Trading Commission in Washington, D.C. several weeks ago.

Making the problem worse is that many of the world's poor already spend a disproportionate amount of their income on food, anywhere from 50 to 80 percent for people in some countries. They simply don't have any discretionary income to pay more for food and with food prices continuing to spiral upward the situation is growing worse.

That has led to riots over food prices by desperate people in several countries. In addition, people in 37 nations are in urgent need of food, according to the Food and Agriculture Organization.