The weaponization of food (Foreign Policy in Focus)
FPIF published an article stating when Russia bombed the port in Odesa last week, it was not an auspicious beginning to the new deal on grain exports. If anyone believed that this agreement between Moscow and Kyiv would have some positive spillover effect on the war grinding on elsewhere in Ukraine, the Russian military surely destroyed that wishful thinking. Food prices were already on the rise before Russia invaded Ukraine. Supply chain problems connected to COVID, the spike in the price of inputs like fertilizer connected to rising energy prices, and diminished harvests connected to climate change: were all contributing to rising prices beginning in 2020. A less well-known factor has been financial speculation. After the food price hikes in 2007-8, IFPRI published an analysis that would prove prophetic: “The flow of speculative capital from financial investors into agricultural commodity markets has been drastic, and the number of future traded contracts is increasing over time. From May 2007 to May 2008, the volume of globally traded grain futures and options rose significantly.” (See When speculation matters) Excessive speculation in the commodity futures market could, in principle, push up futures prices and— through arbitrage opportunities—spot prices above levels justified by supply and demand fundamentals. Republished in Eurasia Review, Informed Comment.