By Paul Burnell
BBC File on 4
Wheat prices are set by international commodity markets
Speculation in commodity markets has been blamed for adding to the recent surge in world food prices, which is painful for businesses and consumers alike.
Michel Ghanjar had a tough call, as he decided when to break some extremely bad news to his boss at the headquarters of Takoradi Flour Mills, in the Ghanaian capital Accra.
As the operations manager processed the books for the previous month's wheat shipment, he found the company lost the equivalent of $250,000 (£125,000).
He opted to tell the boss after the weekend.
Soaring prices
"I think I will show it to him on Monday morning. So like this he will have a nice weekend," he tells BBC File On 4.
Lebanese-born Mr Ghanjar, who is married to a Ghanaian and has lived in the country for the last 17 years, is deeply worried about the effect of soaring wheat prices on his livelihood and that of his adopted nation.
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Michel Ghanjar, Operations Manager, Takoradi Flour Mills |
I don't think the price of wheat should be like this - it is too high
In countries like Ghana, a sharp rise in the price of wheat means people cannot afford bread and hence sales of flour plummet.
Takoradi Flour Mills' sales fell by 36% from March 2007 to 2008.
"I don't think the price of wheat should be like this," says Mr Ghanjar. "It is too high. Nobody can afford it."
"Since February and March, we realised 40% of our production is down."
Mr Ghanjar believes that by the end of the second quarter of this year, the company could have lost $5m and he is worried about how long they can carry such heavy losses.
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"I don't know," he says. "Maybe another two to three weeks, maybe another month. God knows. Let's wait and see."
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Mr Ghanjar's boss also finds little to be sanguine about.
After a lifetime in the business, Armenian-born Serge Bakalian, whose family started the firm in the 1970s, knows , how the price of commodities are easily affected by events such as the weather.
However, he believes the current prices have been pushed way beyond anything that bad harvests or poor weather could justify.
Last year, a tonne of wheat cost him $280. Now it is $800 and Mr Bakalian pins the blame on commodity speculators.
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Serge Bakalian, owner Takoradi Flour Mills
Who is to blame for food price rises? |
"Australia had a drought last year and lost 50% of their crop," he says.
"Canada has losses of 30% because they had wheat damaged by excess of water and a lot of people started speculating on that shortage and helped push the prices up to where they were.
"I am very upset, actually, because countries in the sub-Saharan region are suffering - I think it is quite disgusting."
Like other businesses in developing nations, Mr Bakalian and his employees are at the mercy of wheat prices set by the Chicago Mercantile Exchange in the USA, which claims to set prices for 80% of the world's grains.
Supply and demand
However commodity investors like Jim Rogers, who runs the third largest commodity index fund in the world, reject any notion that their actions have artificially inflated prices.
For the former business partner of super-strategist George Soros, it is the result of the basic economic principles of supply and demand.
Prices are rising, Mr Rogers argues, due to a chronic shortage of supply in the face of rising demand from countries such as China and India.
"People have been investing in commodities in the eighties and nineties and nothing happened to the prices because the fundamentals were different," he explains.
"There was excess supply now there's not.
"Index funds are having an effect on prices, perhaps because the fundamentals are right. There is no oil, there is no rice, and food inventories are at their lowest they've been for 60 years."
Bleak future?
Meanwhile according to the United Nations, food prices may be showing signs of stabilising.
But neither this nor Mr Rogers' comments are much consolation to people like Mr Ghanjar.
"I am afraid to lose my job," he says.
"I don't know if I will be able to send my son to school for the next four to five months.
"I am an expatriate. Maybe I have a good salary. But if the business is not running well for Takoradi flour mill, I will lose my job.
"My worker will lose his job, the baker in the town will lose his job and God knows where it will finish. What is the end of it?"
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