Goldman denies links with global food crises

Date: Tuesday, July 20, 2010
Author: Louise Armitstead, The Telegraph

Goldman Sachs has angrily defended itself against a public campaign that claims the bank is exacerbating global food crises through its commodity trading operations.

The Wall Street bank has dismissed as "disingenuous and downright misleading" the conclusions by the World Development Movement that its activities have led to increased food prices, food riots, and poverty around the world.

The WDM, a London-based non-governmental organisation, on Monday started an on-line campaign to persuade the public to report Goldman to the Financial Services Authority (FSA) as the biggest bank allegedly distorting commodities markets.

The organisers said they want to put pressure on authorities to limit the ability of banks and hedge funds to trade in commodity futures.

The move came as Armajaro, a hedge fund run by Anthony Ward, was accused of cornering the cocoa market and pushing up prices after buying £650m, or 240,000 tonnes, of cocoa beans.

The campaign follows the publication of a report by the WDM called The Great Hunger Lottery: how banking speculation causes food crises, in which the lobby group accuses banks and hedge funds of "gambling on hunger." The report concludes that commodity trading is "dangerous, immoral and indefensible."

The money flowing into commodity index funds and commodity derivatives soared from $46bn in 2005 to $250bn in March 2008, according to the report. The authors claim that the flood of cash pushed up food prices across the world, particularly impacting developing countries. The high price of staple foods provoked a wave of riots in cities across the world during 2007 and 2008.

Tim Jones, who wrote the report, told The Daily Telegraph: "In the 1930s, rules were introduced to limit financial speculation in food markets but these were eroded by the banks, in particular by lobbying from Goldman. Although lots of banks and hedge funds are causing the problems, Goldman is the biggest. We estimate the bank made $1bn profit from trading on food last year."

A Goldman spokesman said the report was "horribly misleading" while the profit estimates were "ludicrously overstated." The bank cited research from international bodies that showed a range of factors have "created a backdrop for global food shortages". The bank also dismissed the claims about the bank's lobbying tactics as "disingenuous and downright misleading."

The FSA is not responsible for regulating market prices. LIFFE is responsible for ensuring orderly commodities markets in London.