05/11/2012 11:33 GMT | Updated 23/01/2014 18:58 GMT

Food prices, Hurricane Sandy and Speculation

"Wanna make a lot of money fast out of people who are hungry?"

The stars of The Revolution Will Be Televised have taken Barclays Bank to task over yet another of its dubious exploits - food speculation. And while the video is humorous, it holds up an outrageous fact that we already know to be true - that bankers profit from misery.

Aside from facing a few days off the trading floor last week in Wall Street, big banks will be the ones to benefit the most from the impacts of Hurricane Sandy. Wall Street and other financial centres, such as the City of London, have ridden the wave of extreme weather over the past year, including the drought in the US, driving food commodity prices to new heights.

In July, world food prices jumped 10%, with maize prices alone rising a record 25% in one month. In Malawi, maize prices soared by a staggering 174% in a year. Locally in the UK we saw food prices add an extra £152 to the average annual household bill in 2011. In developing countries, where up to 90% of income is often spent on food, price rises can literally lead to starvation.

This trend is only set to continue following Sandy's wrath. In Haiti, the poorest country in the western hemisphere, crops have been completely destroyed by the latest hurricane, meaning the country will be even more reliant on expensive imported food. Haiti already imported over 55% of its food, even before the hurricane hit. I'm sure traders everywhere are wringing their hands in anticipation of the potential returns.

It is speculation, and not the weather, that is responsible for the most extreme price hikes. In 2010, after reports of severe weather and crop shortages in Russia, prices also rose to all-time highs. Yet there was a bumper global harvest at the time.

Financial speculation now dominates commodity markets. In June 1996, speculators made up 12% of the wheat market; by June 2011 their share had risen to 61%. In 2006, the value of financial assets in food markets was $65 billion, but by 2011, it had risen to $126 billion.

Here in the UK, Barclays is the biggest commodity speculator, having earned up to an estimated £500 million from speculating on food in 2010 and 2011. It ranks amongst the global top three alongside the familiar names of Goldman Sachs and Morgan Stanley.

This year's poor harvests certainly triggered rising prices this summer, but research by the New England Complex Systems Institute in the US suggests that while food prices are likely to continue to rise steeply, the spike in prices would be significantly reduced if speculation were to be curbed.

Fortunately, regulators have an opportunity to do just that. Rules to limit speculation are on the table at the European Union. On 26 October, MEPs voted to curb speculation in food commodities, but left some serious loopholes, no doubt persuaded by pressure from financial lobbyists that strong regulation wasn't entirely needed. Except it is. And Chancellor George Osborne and his fellow European finance ministers, who are also due to vote on the proposed regulation, still have the chance to tackle the impact of speculation on rising food prices.

Never let a good crisis go to waste, as the saying goes. Only this time, let's hope the European parliament takes advantage of this particular crisis, rather than the banks, and acts in the public interest by applying tough controls on speculation.

George Osborne's position could be crucial in deciding the outcome of this regulatory battle, so let's let him know that gambling on hunger is unacceptable.