World food prices reached their highest levels ever in March 2022.
This investigation analysed financial and trade data to reveal how financial speculators exacerbated the price peak by flooding the commodity markets in attempts to make a huge profit.
This speculation came at the expense of millions of ordinary people who were struggling to feed themselves and their families.
Based on FOI requests we also revealed how this speculation was made possible as a result of financial regulators bowing to pressure from powerful lobby groups and weakening curbs on excessive speculation that were proposed after the 2008 food crisis.
Following publication our investigation received ample secondary coverage, quoted and referenced in The New York Times, Financial Times, Rai 3, and numerous other news outlets and cited in academic research. It basically created a new beat.
The consumer organisation FoodWatch launched a campaign based on our findings aiming for reform of financial regulations. A coalition of Members of the EU parliament announced they will include food speculation when they review rules for the financial markets (MiFID II).
A dozen international aid agencies and advocacy groups approached us to discuss our findings and methodology and ways to include and implement them into their own campaigns and policy briefs to decision makers.
We were invited to brief the German government as well as a UK shadow minister on our findings and how policy should be changed to prevent this from happening again.
Using data obtained from the Securities and Exchange Commission (SEC) and proprietary databases, we recorded the daily money flows into the two top Exchange Traded Funds (ETFs) buying wheat futures. In the first four months of 2022, they had taken in $1.2 billion – compared to just $197 million for the whole of 2021: by April they owned wheat futures equivalent to half the U.K’s annual flour consumption. On March 7th, as both funds achieved record investment flows, Chicago wheat futures hit their highest price – and the markets closed for the day.
We obtained and analysed a decade’s worth of data on food speculation from the Commodities Futures Trading Commission and the European Securities and Markets Authority. It showed that speculators were buying agricultural futures contracts at record levels. In Europe, speculators’ share of buy-side wheat futures contracts has increased from 23% of open interest in May 2018 to 72% in April 2022. In the U.S, “index speculation” – widely seen as a cause of the food price crisis of 2008, was at levels not seen since 2014.
Interviews and obtained documents showed that bankers and asset managers, like JP Morgan’s wealth management team, had encouraged investors to park their money in commodities.
We used freedom of information laws to obtain documents showing how the International Swaps and Derivative Association (ISDA), whose members include the likes of Goldman Sachs, BNP Paribas, Blackrock and Citibank, successfully lobbied the EU regulator, the European Securities and Markets Authority (ESMA), to weaken curbs on excessive speculation that were proposed after the last food crisis in 2008.
Context about the project:
One of the reasons why so many organisations approached us for briefings was the dearth of reportage on this issue. It was generally seen as too technical, too complex and perhaps too difficult to translate how the workings of commodity markets and governance failures affect the day-to-day lives of consumers around the world. We bridged that gap by combing original data analysis with comments from scholars and ordinary people. On it’s own, both of them wouldn’t work. But combining the two was led to a powerful story.
Resource constraints in reporting on this story included access to data (from both exchanges and the EU officials on MiFIID data). Just a few experts were able to speak fluently on the inner workings of European exchange.
What can other journalists learn from this project?
Many journalists shy away from the topic for good reasons: the topic is contested, complex and original data hard to find. There is a lack of public data available in real time to track investor and speculator activity, and a large influence of lobbyists to push back against regulations and against what our findings reveal – that excessive speculation feeds into the food price crisis.
We got a team together with domain experts and financial investigators to figure out whether we could find hard data on food speculation. And we build a network of experts to help us interpret this data. It was the diversity in the team that made this investigation possible.
At the end of June as the Fed raised interest rates, the price of wheat fell to pre-war levels. The movement has generally been seen as another indication that the four month bubble was indeed caused by excessive speculation.
We are working with this collaboration on a follow-up investigation unearthing who the actual beneficiaries of food speculations are.