Conflict in Ukraine generates billions for hedge funds

Experts say that the organizations' "betting on hunger" has made the food situation worse.

The Guardian says that ten of the world's biggest hedge funds made nearly $2 billion from the rise in food prices after Russia's military offensive in Ukraine began. The British newspaper used a study from Greenpeace's investigative journalism branch, Unearthed, and a journalism nonprofit, Lighthouse Reports.

Hedge funds are companies that make money by buying and selling stocks and commodities.

According to the study, researchers looked at the returns made by Societe Generale's SG Trend Index for the first quarter of last year, both before and right after the conflict began on February 24. The main focus of the research was on grains and soy beans. Calculations showed that these commodities made the hedge funds in question $1.9 billion, which is a lot more than they made in the first quarter of any of the five years before.

"Hedge funds helped create a price bubble, which drove up food prices... This has made the world's poorest people more likely to go hungry... By betting on hunger and making it worse, hedge funds and financial traders have made obscene amounts of money. Olivier De Schutter, a UN special expert on extreme poverty and human rights, said about the results, "That can't be right." He said that investors were "piling" into grains and metals on purpose to "capitalize on uncertainty and rising food prices."

Analysts have also found that food companies have made money off of the problem. Calculations showed that the 20 biggest food companies in the world made $53.5 billion in unexpected profits in the last two years. First, food prices went up because of the COVID-19 pandemic, and then they went up again because of the Ukraine situation last year.

Greenpeace International campaigner Davi Martins said, "We are seeing a huge transfer of wealth to a few rich families that basically own the global food system at a time when most people in the world are struggling to make ends meet."

After the start of the military operation, the prices of staple foods like wheat and fertilizers went up sharply. This was caused by rising energy costs as people around the world worried about Russia's energy supplies because of the sanctions that followed the conflict. Later in the year, they calmed down a bit, especially after the Ukraine grain deal was made in the middle of 2022. This deal made it possible for the country's agricultural goods to be exported from Ukrainian ports, even though military action was still going on.

But the situation is still bad because the deal isn't good enough. So far, it hasn't helped Russia sell its own agricultural goods. Russia has trouble getting its goods out of the country because of economic limits. Because of this, food prices around the world are still higher than they were before the conflict in 2021. Last month, the International Monetary Fund warned that "many vulnerable countries still face heightened food insecurity."

Analysts asked world officials to put in place stricter rules for market speculation, such as making the food market more open and limiting the size of positions investors can take in this market.