How can investors help the hungry?
Possible steps include financing small farmers and shunning commodity futures.
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The problem with commoditiesSkip to next paragraph
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Multiple factors help explain why the world in the past 18 months saw such stunning developments as a doubling in wheat prices and tripling in rice prices, according to Olivier De Schutter, United Nations' special rapporteur on the right to food. He says climate change, for instance, and a crippling drought in Australia played roles. But speculation in commodity markets, driven in part by investors seeking havens from slumping stocks, has, in his view, contributed heavily to hunger by pushing food prices out of reach for tens of millions.
"This has been a serious factor aggravating the crisis," Mr. De Schutter says.
Concerned investors need to know, De Schutter says, that small farmers in developing nations are seldom the beneficiaries of spikes in agricultural commodity prices. He plans to report next month to the UN Human Rights Council that retailers and global agribusiness firms have benefited disproportionately from recent price hikes. For his part, Mr. von Braun urges social investors to shun commodity futures trading and instead provide "what small-farm agriculture really needs, [which] is long-term investment."
Reaching out to small farmers
Microfinance investing, through an agency such as Kiva.org or Accion International, can put capital in the hands of small farmers in developing nations. This approach helps poor nations feed themselves as they preserve their agricultural resources, says Monica Marshall, deputy director of private sector partnerships for the World Food Program, the food-aid agency of the United Nations. Accredited investors (those worth more than $1 million or earning more than $200,000 per year) have additional options, such as bankrolling farmer cooperatives in Africa and Latin America through Root Capital in Cambridge, Mass. Rates paid on capital vary in microfinance, but returns seldom outpace today's inflation rates.
Investors can also support indigenous farmers, von Braun says, by helping make drought-resistant seeds and effective fertilizers available at prices they can afford.
Using good-quality seeds, he says, is essential to boost crop yields by as much as 400 percent on a parcel of land. But such seed technology is routinely under patent and made available to international agribusinesses at premium prices.