Something really disquieting about this.

I don’t know about you but I’m picking up more and more ‘vibes’ from all over the place that strongly suggest an increasing awareness of the need for real change in society.  Anyway, more of this another time.

My article today is base on an editorial in the Mole Valley Farmers Newsletter

for October 2010 (no. 557).  First some background to this organisation.

Mole Valley Farmers is described on their web site thus:

Mole Valley Farmers was started in 1960 by a small group of farmers around South Molton* who were concerned by the discriminatory practices and the large margins being taken by many of their input suppliers. From the outset it was decided to treat all members equally, subject only to quantity allowance and that the Company would operate on the minimum margin to allow continuity and growth. Today it remains one of a few true co-operatives in the supply industry.

Mole Valley Farmers consists of:

• Nine branches in the south west supplying a vast range of goods to farmers and the public alike. These range from farm requirements to clothing, footwear, garden supplies, pet food and accessories, domestic goods and power tools
• Our own feed mills for all animal feeds
• Fertiliser blending plants
• A specialist mineral plant
• A quality farm building division

Of special importance are our farmer customers who purchase animal feed, fertilisers and minerals, all manufactured to a high specification by Mole Valley Farmers and delivered direct from point of manufacture to farm or to branches for collection in small lots.

* South Molton is in Devon, England about half-way between Barnstaple and Tiverton and the history of this interesting firm may be found here.

I have to declare a certain interest in that when I lived in Harberton, Devon for a number of years, we were non-farmer Members of Mole Valley Farmers for feed for our chickens and ducks and later on for Pharaoh.  So when I arrived to stay recently for a week with friends in Brixham, Devon,  my eye quickly picked up the familiar look of the MVF Newsletter lying on the table.

This is the editorial, reproduced in full with the kind permission of the Newsletter editor, from the pen of David Burke, Chairman of MVF.

Commodity trading

Until relatively recently, the price of food was set by the forces of supply and demand for the food itself, which worked reasonably well in developed countries able to purchase in times of shortage.  For the last century farmers have been able to reduce some of the market risk by forward selling crops to a trader in that market, at a price that fair to both parties.

This type of trading was tightly regulated and only those who were directly involved could participate and it worked well.  At some time in the mid-90s, Goldman Sachs, with other financial institutions, successfully lobbied for the regulations to be abolished.

Forward contracts became derivatives, which could be bought and sold repeatedly by traders, which enabled the financial institutions to become involved.  This type of investment really took off when the American and European pension market collapsed, together with that for normally traded derivatives like metals, prior to the recession, although actual food supply and demand remained relatively in balance.  Last year Goldman Sachs reportedly made £3.2bn profit from derivatives trading.

In spite of Russia’s grain export ban and some other weather affected harvests, both the EU commission and the International Grains Council report more than adequate reserves of grain to meet demand and that the carry-over stocks are likely to be the second highest for years.  The rumoured (but non-existent) wheat shortage that is driving up all feed prices, is entirely due to actions of the world’s principle investment bankers and their investors, which have serious implications throughout the globe.  Whilst few in the developed world mostly in the Northern Hemisphere, will go hungry, it is a growing tragedy for the poorer countries in the Southern Hemisphere where three-quarters of the world’s population live.  According to the Food and Agricultural Organisation, one third of the population lack food security and 792m people there are undernourished to varying degrees of starvation.  But most damning of all, some 12m children die annually of malnourishment.  Derivative speculation, which pushes up the cost of grains and in particular wheat, is responsible for food inflation that is proportionally greater for the impoverished nations.

Re-regulation of the basic food market to prevent a recurrence of the spikes of 2007 and 2010 would go some way to stabilising global food costs and help with developing nations, though without a great deal of pressure from compassionate people, this will be difficult, given the influence that the world’s richest investors have over governments.  Alternatively, primary food producers worldwide are paid a high enough price for their produce to enable them to invest in research and best practice, as well as in efficient equipment.  This concept received the approval of the European Parliament on 9th September and although they are considering legislation to ensure farmers receive a fairer share of the consumer price, it may be difficult to implement other than through a properly funded and regulated CAP.

Well said, Mr Burke.

NB.  The web links in Mr Burke’s article have been inserted by me, they were not in the original article.

By Paul Handover