Ethanol critics have widely bashed the corn-based fuel for its role in inflating food prices worldwide. But a fascinating article in Der Spiegel, a German news magazine, says classic supply and demand can’t fully explain the recent food inflation phenomenon.

Aggressive hedge-fund investors have played a significant and underreported role in bidding up the price of grocery store items, the article says, in a scheme one analyst equated as “evidence that capitalism is literally consuming itself.”

Farmers and grain wholesalers have long used futures markets as a way to minimize short-term price fluctuations caused by things like storms or drought. At the Chicago Futures Exchange, the regulars are “mainly farmers and silo operators.”

In recent years, though, many index fund managers have looked to food commodities as a way to boost profits, the article says. So now, instead of just grain wholesalers bidding for farmers’ crops, you have a group of deep-pocketed fund managers bidding, too.

One commodities dealer says the trend demands an ethical discussion. Food has become so expensive that prices are sparking riots around the equator, which is the cover story of this week’s Economist. One paragraph in particular stopped me in my tracks:


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… In Haiti, protesters chanting “We’re hungry” forced the prime minister to resign; 24 people were killed in riots in Cameroon; Egypt’s president ordered the army to start baking bread; the Philippines made hoarding rice punishable by life imprisonment …

Why aren’t we hearing more about this? Well, as Stephen Colbert put it, “When you’re covering a landmark presidential campaign, little stories sometimes fall through the cracks. For instance, the small matter of a massive global food shortage”…