Financialization a bigger price increaser than food shortages

When rumors rule more than reality

Food prices have skyrocketed in recent years, and the reasons are more complicated than they first appear. Financial market speculation and the stockpiling of large players control food prices more than actual shortages of raw materials. Sweden has also made itself vulnerable by eliminating its emergency stocks and becoming increasingly dependent on imported food. Jan Wiklund points out that it is not just prices that are rising; after a long period of declining malnutrition in the world, it is now rising again. The shift came around 2017. See FAO data on malnutrition. Not because there is less food, nor solely because of speculation, but mainly because of the complete reliance on global trade, which is fragile.

Speculation drives up prices

The war in Ukraine clearly demonstrated how financial market behavior affects prices. Even though global grain supply was sufficient to meet demand, prices rose dramatically. The reason? Financial markets expected shortages, and this created a self-fulfilling prophecy. The fear led to speculation, and suddenly investors flocked to commodity exchanges. The result was high prices – regardless of the actual supply.

The power of big business

Five companies – ADM, Bunge, COFCO, Cargill and Louis Dreyfuss – control up to 90 percent of the world’s grain trade. These companies made huge profits in 2022 by exploiting crises and shortages. With their large stocks, they can manipulate supply and sell when prices are highest. In Sweden, we have seen how dairy farmers were asked to reduce their production in order to raise the price of dairy products.

This strategy is also used in other areas. During the energy crisis, ships carrying LNG gas held onto their cargoes until prices reached peak levels. The result? More expensive gas for consumers.

Financialization of food

The term financialization describes how the financial sector is gaining increasing influence over the economy. For the food market, this means that prices are often decoupled from supply and demand. Instead, pricing is driven by financial market rumors and investment patterns. This also negatively affects job security, as companies constantly restructure and squeeze costs to maximize dividends to shareholders.

Sweden – a vulnerable importing country

With emergency stocks abolished and half of its food imported, Sweden has become dependent on global supply chains. In times of crisis, such as a pandemic or war, food supplies risk being disrupted. This is a direct consequence of the neoliberal belief in the “invisible hand” of the market.

Better local food production

It is better to ensure that food is grown locally, with trade – regional and global – as a complement. That is what Via Campesina is about: Food sovereignty. European Via Campesina have formulated a policy for the agricultural policy they want to see. Gunnar Rundgren also writes about this on his blog The Garden EarthUnfortunately, Vía Campesina is only represented in Sweden by the small organization North Farm, while LRF often follows the interests of food wholesalers.

Who pays the price?

Primary producers and consumers are hit hard when financial puppies and multinational companies control the price picture. Food prices in Sweden have increased by 25 percent between 2021 and 2024, which hits low- and middle-income earners the hardest. At the same time, warns International Food Workers' Union (IUF) for how financialization undermines both working conditions and productivity.

The solution – regulation and preparedness

To break this destructive trend, political regulation is needed, especially at the supranational level. The food market must be steered towards transparency and fairness. In addition, emergency stocks are required to be reintroduced in Sweden to ensure access to food in times of crisis.

It is high time to take back control from the financial puppies and build a sustainable and fair food supply.

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