Starbucks boss: speculators are cashing in on high food prices

Coffee prices are at a 34 year high, and it’s not just the price of your daily brew that’s gone up. Wheat, cotton, oil – most commodities have been booming over the past year, pushing up inflation and pushing down your standard of living.

And today, the red-blooded capitalist who built coffee chain Starbucks told Channel 4 News that the blame for all this lies squarely and incredibly in one place:

“We are seeing a seismic change in the cost of commodities and ultimately the cost of food in grocery stores at a time when we have high unemployment. I just think it’s inapproriate that there are a group of financial institutions who are somehow orchestrating an unnatural acute rise in commodity prices that ultimately will create a windfall profit for a select few and a significant problem for a whole host of people,” said Howard Schulz to me this afternoon.

That’s the symbol of the American free market, the largest buyer of coffee in the world, basically accusing the City and Wall Street of orchestrating price rises of food for their own benefit.

And it’s not just coffee prices, Mr Schultz talks of similar concerns, sotto voce, from plenty of the world’s biggest companies about almost all commodities. Certainly we are in the middle of some vast volatile swings in commodity prices. But the long term trend is up.

Coffee’s risen by eighty percent over the last year. Wheat’s gone up by sixty percent. And Oil has risen by 45 percent (though it has bounced down and up and down again over the past few days.

The Bank of England’s Deputy Governor Charles Bean today told Channel 4 News that it was helping with an international study into the impact of speculation on the economy.

“This is something that is very much on the G20’s radar at the moment There is a working group which is reviewing all the evidence and is due to report to finance ministers and central bank governors later in the year. There are some policy recommendations that could come out of that if the conclusions are that the increased use of commodities as an asset class has led on occasions to excessive price volatility and is therefore having an effect on the real economy. As far as I am concerned and the bank is concerned we have an open mind on that question.”

Now that is rather interesting. I have asked similar questions about speculation of the Bank of England in the past decade. Most of the time the Bank has been a little dismissive. I think it is beginning to engage, here.
It is a vital issue. It could wreck the global recovery and there are policy tools available right now in the UK.

Despite what Governor Mervyn King called Britain’s economic “soft patch” he predicted inflation heading for higher than 5% – more than double its target. Why? Because domestic gas and electricity prices might be hiked by up to 15% – sending them to all time records.

Back at the coffee house one of the high priests of western capitalism is now saying that the financiers need to be reined in.

So for months now it has become apparent that the rising fuel, food and clothes prices causing so much pain to Britain’s consumers are largely beyond the influence of the Bank of England and government. But some of the world’s leading businessman would perhaps beg to differ.