Barclays denies making £529M betting on food prices

By Mike Stones

- Last updated on GMT

Related tags: Food prices

Barclays denied making £529M on food price speculation
Barclays denied making £529M on food price speculation
Barclays has denied boosting food manufacturing ingredient costs by making £530M on food price speculation.

The bank’s investment arm Barclays Capital had been accused of profiting from the world food crisis and helping to lift prices. Poverty campaigner the World Development Movement calculated Barclays made up to £529M by betting on food prices between 2010 and last year.

But a spokeswoman for Barclays told FoodManufacture.co.uk that was not true.

In a statement the bank said: “Barclays conducts a variety of markets-related activities globally to support its clients. These include commodities trading, where we act as an intermediary. Our clients in agricultural commodities include investment companies, food producers and consumers who, among other things, seek our help to manage risks.

“An active futures market in agricultural commodities ensures that producers and consumers can gain access to risk management products, enabling them to manage sudden upwards or downwards price movements in their prices.”

More predictable

Using futures allows producers and consumer to plan for more predictable cash flows and better manage rapid price movements, it said. This was said to result in a reduction of unexpected costs, which could be passed on to consumers.

“Broad participation in these markets increases liquidity and contributes to a more transparent pricing environment, which benefits both producers and consumers,”​ said the statement.

But Barclays acknowledged a perception that participation in agricultural futures markets by some participants can unduly influence the prices of commodities.

“As a result, we continue to carefully monitor market trends and any research produced on this subject,” said the bank. “To date, a variety of independent official studies conducted by leading organisations indicate that potential factors influencing food prices are complex and multiple, ranging from extreme weather conditions, political action (such as export bans) and enormous rising demand from emerging markets as living standards rise.”

Flak

Meanwhile, last week trading giant Glencore drew flak for describing the global food crisis as a good business opportunity.

Glencore’s director of agriculture trading, Chris Mahoney, said: “The environment is a good one. High prices, lots of volatility, a lot of dislocation, tightness, a lot of arbitrage opportunities.

“We will be able to provide the world with solutions … and that should also be good for Glencore.”

Last week the World Bank’s Food Price Watch warned that global food prices soared by 10% in July from a month ago. Maize and soybean reached all-time peaks due to an unprecedented summer of droughts and high temperatures in both the US and Eastern Europe.

World Bank group president Jim Yong Kim said: “​Food prices rose again sharply threatening the health and well-being of millions of people. Africa and the Middle East are particularly vulnerable, but so are people in other countries where the prices of grains have gone up abruptly.”

The hunger charity Oxfam said the report was “​yet another alarm bell for governments that action on food price volatility is urgently required but it's still not clear whether they are listening”.

Oxfam’s Colin Roche said: "The report says that three-quarters of the change in the prices of internationally traded cereals will be transmitted to domestic markets, and Oxfam is already seeing the devastating impact of food price volatility in developing countries that rely on food imports.”

Urgent action was needed to remedy high food prices, he added.

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