US universities in Africa 'land grab'

Institutions including Harvard and Vanderbilt reportedly use hedge funds to buy land in deals that may force farmers out

guardian.co.uk, John Vidal and Claire Provost, Wednesday 8 June 2011

US universities are reportedly using endowment funds to make deals
that may force thousands from their land in Africa.
Photograph: Boston Globe via Getty Images

Harvard and other major American universities are working through British hedge funds and European financial speculators to buy or lease vast areas of African farmland in deals, some of which may force many thousands of people off their land, according to a new study.

Researchers say foreign investors are profiting from "land grabs" that often fail to deliver the promised benefits of jobs and economic development, and can lead to environmental and social problems in the poorest countries in the world.

The new report on land acquisitions in seven African countries suggests that Harvard, Vanderbilt and many other US colleges with large endowment funds have invested heavily in African land in the past few years. Much of the money is said to be channelled through London-based Emergent asset management, which runs one of Africa's largest land acquisition funds, run by former JP Morgan and Goldman Sachs currency dealers.

Researchers at the California-based Oakland Institute think that Emergent's clients in the US may have invested up to $500m in some of the most fertile land in the expectation of making 25% returns.

Emergent said the deals were handled responsibly. "Yes, university endowment funds and pension funds are long-term investors," a spokesman said. "We are investing in African agriculture and setting up businesses and employing people. We are doing it in a responsible way … The amounts are large. They can be hundreds of millions of dollars. This is not landgrabbing. We want to make the land more valuable. Being big makes an impact, economies of scale can be more productive."

Chinese and Middle Eastern firms have previously been identified as "grabbing" large tracts of land in developing countries to grow cheap food for home populations, but western funds are behind many of the biggest deals, says the Oakland institute, an advocacy research group.

The company that manages Harvard's investment funds declined to comment. "It is Harvard management company policy not to discuss investments or investment strategy and therefore I cannot confirm the report," said a spokesman. Vanderbilt also declined to comment.

Oakland said investors overstated the benefits of the deals for the communities involved. "Companies have been able to create complex layers of companies and subsidiaries to avert the gaze of weak regulatory authorities. Analysis of the contracts reveal that many of the deals will provide few jobs and will force many thousands of people off the land," said Anuradha Mittal, Oakland's director.

In Tanzania, the memorandum of understanding between the local government and US-based farm development corporation AgriSol Energy, which is working with Iowa University, stipulates that the two main locations – Katumba and Mishamo – for their project are refugee settlements holding as many as 162,000 people that will have to be closed before the $700m project can start. The refugees have been farming this land for 40 years.

In Ethiopia, a process of "villagisation" by the government is moving tens of thousands of people from traditional lands into new centres while big land deals are being struck with international companies.

The largest land deal in South Sudan, where as much as 9% of the land is said by Norwegian analysts to have been bought in the last few years, was negotiated between a Texas-based firm, Nile Trading and Development and a local co-operative run by absent chiefs. The 49-year lease of 400,000 hectares of central Equatoria for around $25,000 (£15,000) allows the company to exploit all natural resources including oil and timber. The company, headed by former US Ambassador Howard Eugene Douglas, says it intends to apply for UN-backed carbon credits that could provide it with millions of pounds a year in revenues.

In Mozambique, where up to 7m hectares of land is potentially available for investors, western hedge funds are said in the report to be working with South Africans businesses to buy vast tracts of forest and farmland for investors in Europe and the US. The contracts show the government will waive taxes for up to 25 years, but few jobs will be created.

"No one should believe that these investors are there to feed starving Africans, create jobs or improve food security," said Obang Metho of Solidarity Movement for New Ethiopia. "These agreements – many of which could be in place for 99 years – do not mean progress for local people and will not lead to food in their stomachs. These deals lead only to dollars in the pockets of corrupt leaders and foreign investors."

"The scale of the land deals being struck is shocking", said Mittal. "The conversion of African small farms and forests into a natural-asset-based, high-return investment strategy can drive up food prices and increase the risks of climate change.

Research by the World Bank and others suggests that nearly 60m hectares – an area the size of France – has been bought or leased by foreign companies in Africa in the past three years.

"Most of these deals are characterised by a lack of transparency, despite the profound implications posed by the consolidation of control over global food markets and agricultural resources by financial firms," says the report.

"We have seen cases of speculators taking over agricultural land while small farmers, viewed as squatters, are forcibly removed with no compensation," said Frederic Mousseau, policy director at Oakland, said: "This is creating insecurity in the global food system that could be a much bigger threat to global security than terrorism. More than one billion people around the world are living with hunger. The majority of the world's poor still depend on small farms for their livelihoods, and speculators are taking these away while promising progress that never happens."

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Hedge funds 'grabbing land' in Africa

BBC News, 8 June 2011

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Hedge funds are behind "land grabs" in Africa to boost their profits in the food and biofuel sectors, a US think-tank says.

Foreign firms are snapping up farming land in
Africa, a new report says

In a report, the Oakland Institute said hedge funds and other foreign firms had acquired large swathes of African land, often without proper contracts.

It said the acquisitions had displaced millions of small farmers.

Foreign firms farm the land to consolidate their hold over global food markets, the report said.

They also use land to "make room" for export commodities such as biofuels and cut flowers.

"This is creating insecurity in the global food system that could be a much bigger threat than terrorism," the report said.

The Oakland Institute said it released its findings after studying land deals in Ethiopia, Tanzania, South Sudan, Sierra Leone, Mali and Mozambique.

'Risky manoeuvre'

It said hedge funds and other speculators had, in 2009 alone, bought or leased nearly 60m hectares of land in Africa - an area the size of France.

In the field

• Umaru Fofana
  
  BBC African Service, Sierra Leone
  
  When I visited Lungi-Lol in rural Sierra Leone I saw men hoeing thousands of hectares of farmland owned by Addax, a Swiss-based bio-energy company.
  
  They are growing sugarcane to produce biofuels.
  
  Campaigners say this contributes to food insecurity, but many people here welcome Addax's presence.
  
  Francis Koroma, who works on the farm, says: "We thank God for Addax. I am gainfully employed and I receive about $70 (£46) a month. Before, I spent a whole year without getting $50."
  
  Villagers are unaware of the controversy surrounding biofuels.

Abdulai Conteh, a local traditional leader, said: "Some people are doing business here but I have no idea what they are doing with our land. I see them growing sugarcane. That's all I know."

"The same financial firms that drove us into a global recession by inflating the real estate bubble through risky financial manoeuvres are now doing the same with the world's food supply," the report said.

It added that some firms obtained land after deals with gullible traditional leaders or corrupt government officials.

"The research exposed investors who said it is easy to make a deal - that they could usually get what they wanted in exchange for giving a poor tribal chief a bottle of Johnnie Walker [whisky]," said Anuradha Mittal, executive director of the Oakland Institute.

"When these investors promise progress and jobs to local chiefs it sounds great, but they don't deliver."

The report said the contracts also gave investors a range of incentives, from unlimited water rights to tax waivers.

"No-one should believe that these investors are there to feed starving Africans.

"These deals only lead to dollars in the pockets of corrupt leaders and foreign investors," said Obang Metho of Solidarity Movement for New Ethiopia, a non-governmental organisation in Addis Ababa.

However, not all companies named in the report accept that their motives are as suggested and they dismiss claims that their presence in Africa is harmful.

One company, EmVest Asset Management, strongly denied that it was involved in exploitative or illegal practices.

"There are no shady deals. We acquire all land in terms of legal tender," EmVest's Africa director Anthony Poorter told the BBC.

He said that in Mozambique the company's employees earned salaries 40% higher than the minimum wage.

The company was also involved in development projects such as the supply of clean water to rural communities.

"They are extremely happy with us," Mr Poorter said.

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“Locavesting”: Capitalism for Main Street

“Locavesting”: Capitalism for Main Street

Reuters, JUN 7, 2011

Amy Cortese

You’ve heard of eating local and shopping local – now a new book urges you to take the same approach to your portfolio. Locavesting: The revolution in local investing and how to profit from it guides readers through the idea that investing in local businesses, instead of faceless conglomerates, can not only benefit your local economy, it can boost your bottom line, too.

The book, by freelance journalist Amy Cortese, evolved out of a story she wrote on local stock exchanges in the wake of the financial meltdown.

“People were coming up with new ways to funnel more investment capital to the locally owned companies that create jobs and healthy communities and are too often ignored by the financial establishment,” she says. Locavesting is about restoring the bonds between investors and companies. “It’s capitalism for Main Street.”

Cortese gives Reuters an inside look at the world of locavesting and how you can get started.

The book really exposes the cracks in today’s financial system — how does it highlight the need for “locavesting”?

I think what the financial crisis did was strip bare the inner workings of Wall Street and expose just how greedy and self-interested it had become. And there was a stark contrast between what was happening on Main Street — where people were out of jobs, homes were being foreclosed, small businesses couldn’t get funding — and here you had the big bailout, and shortly afterwards, Wall Street came roaring back. It really exposed, for a lot of people, the dichotomy of Main Street versus Wall Street. And a lot of people, myself included, were looking for alternatives. The fact was, Wall Street was not taking care of Main Street — and neither was government, really. So if something was going to happen, people had to take it upon themselves.

Early in the book you pose the question, “What would the world look like if we invested 50 percent of our assets within 50 miles of where we live?” Any ideas?

I don’t think we’re ever going to get anywhere near 50 percent … but five percent, 10 percent, even one percent would make an enormous difference. Right now there’s an estimated $26 trillion that Americans have invested in the stock market. You could argue that very little of that goes to locally-owned companies, because mainly they’re small and private. And we’re just not set up to invest that way. So just imagine if only one percent of that $26 trillion was diverted to locally-owned companies, I think that would have a huge impact.

Socially responsible investing often gets a bad rap for high fees, low returns. Is locavesting up against that same pre-conception?

It may be too early to answer that. SRI is very different. One of the raps against it is it’s not very proactive — you’re screening out undesirable companies but you’re not proactively seeking out the ones that you want to support and invest in. And that’s what local investing does. However, that said, there is an economic cost to investing in small companies. You have to vet them, you have to do all the legwork that you would do for a larger investment. So there is that cost built in, and that’s the challenge: coming up with models that make it economical and efficient to invest in small companies without spending so much to research them.

Is there money to be made in investing in local business — besides the contribution you’re making to the local economy? Is it actually lucrative?

There’s not going to be a one-size-fits-all kind of answer to that. I think it’s going to vary. But I would say yes, of course — small businesses can be very profitable. They can have very good revenue models and they don’t even have to be high growth to be a good investment. Every big company has started as a small company. That said, it will really vary. Some of the locavesting models and companies are, by design, providing a fairly modest return — maybe four to six percent. But that’s not so bad these days. And I would argue that local businesses can be much less risky. You know them, there’s a level of familiarity and there’s accountability that comes with a locally-based company that you don’t get with a big complex corporation. Yes, small businesses can be risky — but no more risky than a giant corporation halfway around the world that you can never truly fathom.

What advice can you offer someone who wants to start investing locally?

The first thing I would recommend is to do your banking with a community banker or credit union.

Secondly, there are things called community loan funds. Most communities have something like this — they’re regional funds, kind of like a certificate of deposit, where you put your money in and usually the rates range from two to four percent. It’s a place to park your money, and the money goes to work in your region.

I would also suggest food co-ops, energy co-ops. They’re a good thing to join in general. You can claim a patronage rebate at the end of each year usually based on what you’ve spent. Often, these co-operatives, which are democratically run and very community-based, they look to their member owners to raise money. And here again is a way to lock-in rates as high as six percent on your money for a three- or four- or five-year loan.

There’s also something called direct public offerings, which are like an IPO except there’s no Wall Street middleman getting his seven percent cut. What the wall street underwriter has traditionally done in the past is pre-sell the shares to their institutional clients. If you’re a company and have a loyal customer base, you can market those shares directly. And that’s a better deal for everyone — it’s taking a layer of cost out and a lot of companies that couldn’t afford to go public suddenly have access to public funds. And for the investors it’s getting in on the ground floor.

This interview has been edited and condensed.

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That Look, That Weiner-Spitzer-Clinton Look

The New York Times, June 7, 2011, 5:26 PM

Clockwise from top left: Richard Perry / The New York Times; Keith Meyers for
the New York Times; Hiroko Masuike for The New York Times; Stephen
Crowley/The New York Times; Greg (ibson/Associated Press; Associated Press.)

The names may change, but the face remains essentially the same.

Politician after politician, in scandal after scandal, faces the cameras with his lips pursed and pulled tight, narrowing them. The chin boss — the fleshy bump above the chin bone — is pushed upward, pulling the lips into an upside-down smile. Add a downward-cast gaze, perhaps a shake of the head, and: Instant Disgraced Pol.

On Monday, Representative Anthony D. Weiner became the latest in a long and unfortunately distinguished line of officials whose faces appeared all over the news wearing an expression that instantly telegraphs powerful-guy-confesses-impropriety.

Former Gov. Eliot Spitzer of New York is perhaps the standard-bearer of this parade as he admitted to patronizing high-priced prostitutes.

But President Bill Clinton, during the Monica Lewinsky scandal, and former Gov. James E. McGreevey of New Jersey, when he announced that he was gay and had carried on an affair with a man, wore it too during their public falls from grace.

Likewise, there were Eric Massa, a former New York congressman who resigned after admitting to an inappropriate exchange with a state aide, and former Senator John Ensign of Nevada, who resigned during an ethics investigation related to his affair with the wife of a former top aide.

To interpret the meaning of that now-familiar face, City Room called upon Dan Hill, the president of Sensory Logic, a market-research firm in Minneapolis that uses facial expressions to quantify emotional response. He is also the author of “Emotionomics.” Here, in an e-mail and in a telephone interview, was his explanation:

• Lips pursed and pulled tight is a sign of anger. Anger as an emotion typically means you feel like you’re not in control of circumstances. It arises from lack of progress, confusion, feelings that one’s being dealt with unfairly, i.e. resentment. These are powerful men used to being in charge. So it likely signifies feeling vulnerable (not in control).
  
  The chin raiser, where the chin boss pushes upward, causing the lower lip to push upward, could also be called an upside-down smile. It’s a muscle movement implicated in expressions of anger, disgust and sadness.
  
  Disgust is an emotion that relates back, in evolutionary terms, to “bad taste” or “bad smell.”
  
  The bad-taste version is as if to protect the mouth from taking in something that is poisonous. Clearly, these scandals are (sometimes fatally) poisonous to the politicians’ careers. It’s as if the whiff of scandal tastes bad to them.
  
  Eyes and head down both correspond to sadness, i.e., disappointment in oneself. Regret. Like disgust, it’s a sign of withdrawal, as if to remove oneself from what has caused shame or embarrassment.
  
  The basic package you’ve got here is anger, disgust and sadness.

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Fears grow for missing Syrian 'Gay Girl' blogger

CNN News, By Barry Neild for CNN, June 7, 2011

Several campaigns have been launched on Facebook and Twitter
demanding Abdallah's release.

STORY HIGHLIGHTS

• Woman behind "A Gay Girl in Damascus" blog abducted, relatives say
• Amina Abdallah, 35, has become an icon of Syrian uprising thanks to media exposure
• Abdallah previously told CNN she was in hiding after earlier abduction attempts

(CNN) -- A woman whose outspoken "Gay Girl in Damascus" blog has made her an unlikely icon of the Syrian uprising has allegedly been abducted.

Relatives of Amina Adballah, an English teacher seen as a prominent opposition voice thanks to international media exposure, said she was bundled into a car by suspected security agents on Monday.

The disappearance of Abdallah, who holds dual American and Syrian citizenship, has prompted thousands to join online campaigns on both Facebook and Twitter demanding her release.

A post on Abdallah's website written by a woman who introduced herself as her cousin said the blogger had been grabbed by armed men on her way to a meeting.

"Amina was seized by three men in their early 20s," Rania Ismail wrote. "One of the men then put his hand over Amina's mouth and they hustled her into a red Dacia Logan."

The claims made on the blog could not immediately be verified. CNN has attempted to contact Abdallah's family but has so far received no response. Calls to officials in Damascus and at Syria's embassy in London went unanswered.

Abdallah's disappearance came as Syrian officials vowed to step up action against protesters it blamed for the deaths of dozens of security forces. Violence in three months of anti-government protests has killed an estimated 1,200 civilians.

Ismail wrote that Abdallah, who has used her blog to challenge taboos in the conservative country where homosexuality is illegal but unofficially tolerated, had feared she would be abducted.

Abdallah, 35, had previously written about how her father prevented security agents from arresting her for being an Islamic extremist and a foreign agent.

Last month she told CNN she had been in hiding with her father since a second attempt to abduct her. In another blog post she recounted what she said was an attempt to lure her to a hotel to abduct her.

In the latest blog update on Monday, Ismail wrote that Abdallah's family was trying to find out who was holding her.

RELATED TOPICS

• Syria
• Blogs and Blogging
• Middle East

"We are hoping she is simply in jail and nothing worse has happened to her," she said.

"Unfortunately, there are at least 18 different police formations in Syria as well as multiple different party militias and gangs."

She added: "We do not know who took her so we do not know who to ask to get her back. It is possible that they are forcibly deporting her.

"From other family members who have been imprisoned there, we believe that she is likely to be released fairly soon. If they wanted to kill her, they would have done so."

Press freedoms watchdog Reporters Without Borders says Syrian security officials have arrested numerous bloggers and journalists as part of a widespread crackdown on challenges to President Bashar al-Assad's grip on power.

Abdallah, who says she was born in Virginia to an American mother and Syrian father, last posted to her blog on Monday -- a poem ending with the lines: "Soaring and flying/Freedom is coming/Here am I wanting/To know it one day."

On Sunday she wrote about the Syrian government's efforts to block news about the uprising.

"In my ever humble opinion, the regime shut down the internet out of desperation; they are beginning to really feel how far they've fallen," she wrote. "I'm not the only one who thinks that they will not be able to get back up from this."

In her interview with CNN last month Abdallah said the reaction to her blog had been "almost entirely positive."

"A whole lot of long time changes are coming suddenly bubbling to the surface and views towards women, gay people and minorities are rapidly changing," she said.

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Anthony Weiner in tearful confession over Twitter pictures

A married US congressman sent lewd photographs of himself to young female admirers over Twitter and Facebook then lied about being the victim of hackers when he was caught, he admitted last night.

Telegraph, By Jon Swaine, New York11:16PM BST 06 Jun 2011

Congressman Anthony Weiner speaks during a press
conference Photo: EPA

Anthony Weiner, a Democrat from New York, broke down in tears as he confessed to "inappropriate conversations" with six women online and over the phone in the past three years.

"I have made terrible mistakes, I have hurt the people I love the most, and I am deeply sorry," he said, in a hastily-arranged press conference in a Manhattan hotel.

Mr Weiner, 46, repeatedly apologised to his 34-year-old wife Huma Abedin, a senior aide to Hillary Clinton, the US Secretary of State, and to his constituents, but said he would not resign.

"I don't believe I did anything here that violates any law or violates my oath to my constituents," he said. Some of the conversations dated back to before his wedding last summer.

However Nancy Pelosi, the Democratic leader in the House of Representatives, called for an inquiry “to determine whether any official resources were used or any other violation of House rules occurred.”

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His admission came hours after new topless photographs that he emailed Meagan Broussard, a 26-year-old single mother from Texas, were published by Big Government, a conservative website.

They cast fatal doubt over Mr Weiner's unlikely claim that a picture of a man's crotch, which was sent to another young woman in Seattle from his Twitter account last week, was sent by hackers.

Mr Weiner's explanation raised eyebrows when he could not say "with certitude" that the crotch was not his, but continued to insist that he had not sent the picture.

He admitted last night that he meant to send it privately but inadvertently made it publicly viewable. "I panicked, I took it down and said that I had been hacked," he said.

He also confirmed a claim by the website that he had also sent an "X-rated" photo of his body to Miss Broussard. "This was me doing a dumb thing, doing it repeatedly and then lying about it," he said.

Andrew Breitbart, the founder of Big Government, said at the press conference: "It didn't have to be this way. He could have been truthful. I'm here to watch myself be vindicated".

Mr Weiner, a representative for parts of Queens and Brooklyn since 1999, had been likely to run for Mayor of New York in 2013. He said last night that he would continue to Tweet and use Facebook.

Asked about the future of his marriage, Mr Weiner said: “I love my wife very much, and we have no intention of splitting up over this ... she’s very disappointed. But she also told me that she loved me and that she wanted to get through this.”

Earlier this year Chris Lee, another married New York congressman, resigned hours after topless pictures he had sent a woman he met online were published by a gossip website.

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UN chief "especially concerned" over reports of children killed, tortured in Syria

English.news.cn 2011-06-07

UNITED NATIONS, June 6 (Xinhua) -- UN Secretary-General Ban Ki- moon said on Monday that he was "especially concerned" about reports of children being killed and tortured in Syria where the violence is escalating.

"We previously noted the government's declaration of amnesty and call for dialogue," Ban said in his monthly press conference.

"Unfortunately, that has been overtaken by recent events. I am concerned about reports of children killed or tortured, such matters must be investigated thoroughly and their perpetrators brought to justice."

Ban called on the Syrian government to "respect the rights of its people."

Since the beginning of unrest in Syria in mid-March, hundreds of people, including security forces, have been killed. The authorities' reaction to the peaceful protests has evoked wide denunciation.

UN human rights commissioner Navi Pillay last week strongly criticized Libya and Syria at a session of the Human Rights Council in Geneva.

European nations have urged the UN Security Council to warn Damascus that its crackdown could be a crime against humanity.

Additionally, Syria's official SANA news agency reported over the weekend that six Syrian people were killed and around 100 wounded by Israeli troops at Golan Heights.

"Regarding the weekend's shootings along the Golan Heights, let me emphasize the parties concerned share responsibility for preventing needless civilian death," Ban said.

SANA quoted Ali Kanaan, head of the Mamdouh Abaza Hospital in Quneitra province in southern Syria, as saying that his hospital received six bodies killed by Israeli troops and around another 100 who were injured, as they have been subject to direct gunfire and received bullets in the chest and other parts of the body.

The Israeli army used riot dispersal gear and opened fires, as several hundred protesters approached and tried to cross the fences along the cease-fire line between Israel and Syria in Golan Heights, shortly before noon on Sunday.

Editor: yan

UN Declares Internet Access a Human Right

OS News, by Thom Holwerda, Sat 4th Jun 2011

Since it's weekend, let's start with some good news we can all be happy about. The United Nations has declared internet access a human right, and has called upon all nations to not instate any laws that have the power to cut people off the internet, with France and the UK being singled out because they passed three strikes laws.

UN

The report comes from the hand of Frank La Rue, United Nations Special Rapporteur on the Promotion and Protection of the Right to Freedom of Opinion and Expression. In it, La Rue expresses his concerns over several recent developments, such as arbitrsry blocking and filtering of internet traffic, three strikes laws, complete internet blackouts during political unrest (Syria, Egypt), and so on. He believes that cutting users off from the internet violates several international treaties on human rights.

La Rue takes is concerned about governments using the guise of terrorism to censor content on the web. "Such laws are often justified as being necessary to protect individuals’ reputation, national security or to counter terrorism. However, in practice, they are frequently used to censor content that the Government and other powerful entities do not like or agree with," he argues. See WikiLeaks, for instance.

When it comes to ridiculous three strikes laws promoted by people like Sarkozy, La Rue is pretty clear. "The Special Rapporteur calls upon all States to ensure that Internet access is maintained at all times, including during times of political unrest," he writes, "In particular, the Special Rapporteur urges States to repeal or amend existing intellectual copyright laws which permit users to be disconnected from Internet access, and to refrain from adopting such laws."

"Given that the Internet has become an indispensable tool for realizing a range of human rights, combating inequality, and accelerating development and human progress, ensuring universal access to the Internet should be a priority for all States," the report concludes, "Each State should thus develop a concrete and effective policy, in consultation with individuals from all sections of society, including the private sector and relevant Government ministries, to make the Internet widely available, accessible and affordable to all segments of population."

It will not come as a surprise to you that I am in full agreement with declaring internet access a human right. Things like the French three strikes laws are wholly and utterly totalitarian, especially since individual citizens can do very little to protest against these disconnections. The fact that such a law has come into effect in a country which claims to be developed and free (France) clearly shows that despite all our western talk of spreading freedom and democracy, our own governments seem all to eager to disregard these values whenever it suits them.

Sadly, this report is just a first set of recommendations, which will be followed by countless rounds of negotiations to form a treaty on the subject. This means that most of these recommendations will probably be watered down until they become meaningless - so that our government can continue to try and curb the freedom of the web. It just goes to show that freedom of speech is a paper-thin construct that requires constant vigilance - not by governments, but by the people.

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Global food crisis: the US speculators playing with our daily bread

As food prices reach record highs, how much is the speculation in agricultural commodites to blame?

guardian.co.uk, Felicity Lawrence in Chicago, Thursday 2 June 2011

Traders signal offers in the corn options pit at the Chicago Board of Trade.
Photograph: Scott Olson/Getty Images North America

With food prices reaching record highs again this year, what goes on inside a 650ft Chicago skyscraper topped by a statue of the goddess Ceres is coming under intense scrutiny.

It is here that the world's oldest futures and options exchange, the Chicago Board of Trade (CBOT), was established in 1848 to serve the great grain belt that had opened up in the American midwest. And it is here that the international price of agricultural commodities is set to this day.

"There's a lot of weather in the market, the northern growing season has been traumatic, with drought in Europe and China and tornadoes and floods in the US. No one is panicked yet, but any additional crop loss, say in Russia, will quickly bring new worry to the market and that could quickly turn to panic. We may be one more event away from panic," Dan Basse, president of AgResource, one of Chicago's most respected commodity analyst companies, warned as we watched the opening of a day's trading last month.

G20 agriculture ministers will meet in Paris on 22 June to discuss food security and prices. Speculative activity and how to contain it is high on their agenda.

Debate has been raging since 2008, when price rises provoked riots around the world, about whether or not the new money that has flooded into the commodities markets since 2003 is the cause of the problem – and if so, how to regulate it.

In Chicago, before the financial day begins, teams of traders pump themselves up outside on chain-smoked cigarettes and outsize McDonald's coffees. The coloured blazers they use to make themselves easily identifiable on the trading floor have been reduced to bright jackets with string-vest backs to counter the heat generated by a day's speculation. They keep on their toes in training shoes.

Inside, when the bell announces the start, there is a frenzy of noise. Traders yell at one another and wave their arms in violent gesticulation, palms out to signal sell, palms in to signal buy. There are "scalpers" who buy and sell within seconds, "floor brokers" hedging for corporate accounts, and hundreds of runners rushing orders to the recorders.

At the end of May, the price of corn was up again – most traders and analysts expected it to continue rising along with other commodities.

Basse is one of those who thinks underlying fundamentals – a serious mismatch between supply and rapidly growing global demand – are behind this year's price rises.

"Speculation is the easy thing to point the finger at and it's easy to fix. Back in 2008, when prices were up and there was lots of money pouring in, that may have pushed prices up, but today we don't see that as having a significant effect," Basse said.

"Look at growth in world livestock demand and in biofuels demand, and you can see what's been driving the agricultural bull market."

He painted a troubling picture of what is likely to come. He estimates the world needs to bring around 10.3m hectares of new land a year into food production "just to keep stocks steady", but he says that will be increasingly hard to do as the land that remains available is reduced to what is environmentally fragile.

A "weekend" farmer of GM crops himself, Basse admits the promise that biotech seeds would deliver big increases in yields has turned out to be illusory. He also fears that "superweeds are coming on so fast with GM that US farmers are going to have to go back to more traditional cultivation methods [as opposed to the practice with GM seeds of not tilling the soil and simply spraying to control pests] – but they don't have the capacity to do that."

Europe, Basse said, will soon have no choice but to lift its ban on imports of GM crops for animal feed. With its own crops suffering drought, it will have to turn to Brazil, the only major supplier of non-GM imports. However, the Chinese have already bought up large chunks of the Brazilian crop. The policies in the US and the EU of promoting biofuels will be unsustainable.

The company that owns CBOT, the Chicago Mercantile Exchange group (CME), also rejects the notion that the enormous rise in speculation in agricultural commodities in recent years has caused food price rises.

Farmers and processors of physical goods have long used commodities exchanges such as Chicago's to hedge against risks such as bad harvests. Speculators willing to take the risk perform a useful role in providing liquidity. But much of the recent growth in speculation has been through new "structured" products invented by banks and sold to investors.

After intense lobbying, banks won deregulation of commodities markets in the US in 2000, allowing them to develop these new products. Goldman Sachs pioneered commodity index funds, which offer investors a chance to track changes in a spread of commodity prices including key agricultural commodities.

Between 2003 and 2008, investment in commodity index funds rose from $13bn to $317bn (£193bn). But the CME's head of product development, Fred Seamon, said: "There is no credible evidence that suggests index funds or any group of traders are a cause for high prices or increased volatility. There may be a correlation, but that's a completely different thing."

CME argues that the volume of speculation is not a problem, because the overall composition of the agricultural commodities market has not changed; the increase in activity by index funds has been matched by an increase in trading by those who are commercial participants, that is those who have a direct interest in the physical goods.

"That's an indefensible position," Chicago–based hedge fund manager Mark Newell of Quiddity retorted. He and another hedge fund manager, Mike Masters, prepared testimony to the US Senate when it was looking into the effect of speculation on food prices in 2008.

"When billions of dollars of capital is put to work in small markets like agricultural commodities, it inevitably increases volatility and amplifies prices – and if financial flows amplify prices of food stuffs and energy, it's not like real estate and stocks. When food prices double, people starve ," Masters said.

The UN rapporteur on the Right to Food, Olivier de Schutter, added his weight to Masters' side of the debate at the end of last year when he concluded a speculative bubble was responsible for a significant part of the food price rises.

An OECD study, however, did not find a link. Aid agencies such as Oxfam and Christian Aid are calling for reregulation.

In the US, the regulator – the Commodities Futures Trading Commission – has until July to produce a new framework for the commodities markets for Congress. It has been looking at imposing limits on the size of positions that traders can take, and at regulating the commodity index fund trades that are currently unregulated because they take place "over the counter"; that is, between investors and banks. But the financial industry has proved resistant to reforms. G20 ministers will have to decide their own position soon, too.

Newell, meanwhile, remains convinced that without action prices will continue to go up, partly because of underlying fundamentals, but also because, just like in 2008, "the game's afoot again".

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