Bet the Farm: Spinning Wheat into Gold

In his book “Bet the Farm,” Fred Kaufman explores the relationship between commodities speculation on Wall Street and rising food prices everywhere.

Nightmare Pizza

The food best suited to feed the world, Fred Kaufman decided, was pizza, loved the world over by foodies and anthropomorphic teen turtles alike.

Illustration By Kyle Fewell

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In 2009, the United Nations’ Food and Agriculture Organization made headlines when it announced that a billion people would go hungry that year. By way of explanation, the organization offered a deduction: The economic downturn paired with the rising cost of food staples had set the price of basic sustenance beyond reach for one in seven people around the world. But part of this equation went unexplained. Why was the price of food so high in a world where farmers, amazingly, grew more than enough to feed everyone?

By October 2012, when the Food and Agriculture Organization (FAO) revised its billion-count to about 870 million, people were catching on. Oxfam’s Luca Chinotti, for one, was not reassured by the FAO’s statistical adjustment. “The fact that almost 870 million people—more than the population of the U.S., Europe, and Canada—are hungry in a world which produces enough for everyone to eat,” he said, “is the biggest scandal of our time.”

The details of that scandal are laid bare in a recent book by Frederick Kaufman, Bet the Farm: How Food Stopped Being Food. As it turns out, we are already acquainted with this story’s villain: Wall Street. There, bankers and investors are investing unprecedented amounts in commodities such as wheat. And when wheat speculation on Wall Street drives up the price of real wheat everywhere, people around the world can no longer afford to eat. Kaufman details exactly how this has happened in a story of traders, long-standing commodities markets meant to stabilize the price of food, and corruption.


A longtime food journalist, Kaufman didn’t set out to expose the bankers and brokers on Wall Street. “I was having a conversation with my editor at Harper’s, Luke Mitchell,” Kaufman recounts over the phone, “and we were talking about what we would do now that we had written so much about food. The idea then was broached that maybe it was time to write about not enough food and that in fact we might get back to the whole notion of a billion hungry people on earth. Get back to it in the sense that this had been a rather hot topic in journalistic circles and popular conversation in the 1960s and 1970s, and then had gone away. We were trying to figure out why that had happened.”

Kaufman, a clear-minded and fast-paced conversationalist, seems to answer himself in the next breath. “Now, to write about world hunger is generally perceived to be a losing proposition. You know, people have compassion fatigue. People are not particularly interested in starving children in Africa or Asia. They have their own problems. So one of the first rules when I started thinking about this book was how to write a book about global hunger with no hungry people.”

Kaufman devised a question, deceptively simple—“Why can’t we all have healthy, delicious, affordable food?”—and set out in search of an answer. The food best suited to feed us all, he decided, was pizza—loved the world over by foodies and anthropomorphic teen turtles alike. Kaufman visited a Domino’s pizza dough factory, a sustainable tomato super-farm, and a genetic modification lab. He traced pepperoni to processing plants and fast-melting cheese to dairy farms. While much was revealed about our broken food system, none of it exposed the root cause of rising food prices or global hunger. To the contrary, things seem to be running at ever lower costs on the production end of the global food supply. In fact, Kaufman found that farmers’ profits have diminished to a point of hopelessness. Suicides are on the rise from Ghana to the United States. Even middlemen’s profit margins tend to be small and economically rewarding only at high volumes. Still, the market price of wheat and other staples rise.

He seemed to be on the wrong track. “Now, why do people starve?” he asks rhetorically. “They’re not starving because there isn’t enough food, in fact there’s more than twice the amount of food on earth to feed everybody on earth. They’re starving and they’re food insecure because they cannot afford the food. […] At that point I realized that the question that really needed to be asked was, ‘How did food get its price?’ And if I figured out how food got its price, then I would be able to answer all my other questions.”


In 2008, rising prices for staples like corn, rice, and wheat sparked riots in 27 countries from Bangladesh to Egypt to Haiti, Kaufman writes in Bet the Farm. “Not to mention Milwaukee, where a food voucher line of nearly three thousand people descended into chaos.”

In 2010, prices soared again. Is it pure coincidence that a food vendor signaled the start of Tunisian uprisings when, out of options for supporting his family, he lit himself on fire? And Egypt, Kaufman reveals, is the world’s largest importer of wheat. “When the price of wheat spiked in 2011,” he writes, “hunger, violence, and political turmoil descended like a biblical plague, and the result was revolution.” In the U.S., the number of Americans in need of food assistance rose to 46 million. Amidst record-breaking demand for food stamps and food shelves, nearly a million Angelenos went hungry. In Detroit, grocery stores were guarded. But the question of why had not been answered. Behind the spectacle of guarded grocery stores, riots, and revolutions, something was determining the price of food—and it wasn’t simple supply and demand.

Kaufman found himself researching the history of the commodities market. Wheat futures, he found, had been conceived in the 19th century to predict demand and reduce price volatility, thereby stabilizing the cost of bread. The farmer traded a bit of potential profit for security and the buyer got a deal. This method of swapping grew, eventually evolving into the modern grain futures market, in which an exchange (such as the Minneapolis Grain Exchange) acted as a mediator between those looking to buy and sell grain. Some speculation, buying a grain future with intent to sell before the contract delivery date, was allowed—but not enough to inflate prices. Of this time, Kaufman writes, “despite the occasional market collapse (onions, potatoes) and the inflationary run of the 1970s, the price of wheat generally remained stable, farmers made a living, food processors made a killing, an increasing number of people had plenty to eat, and, generally speaking, the United States prospered.”

Fast forward to 1991, when Goldman Sachs created the first commodities index. This bundle of food derivatives was invented to stir investor interest in generally stable, therefore unexciting, commodities markets. The idea worked. The index was a hit, other banks followed suit, and by the late ‘90s, only one thing stood in the way of higher profits: regulation. At the time, speculators could hold only 5,000 wheat futures contracts, a limit instituted in 1936. “One of the key lessons that we learned after the Great Depression is that those futures markets must be regulated,” says Kaufman. “But we had a mania—not only a global but a national mania—for deregulation and ‘liberalization’ of trade policies in the 1990s. And all of a sudden, these markets that had worked so beautifully—and that not only had helped manage risks for large corporations but had made the price of bread affordable for everybody, including city-dwellers who depend on a stable price of bread—these markets turned from fairly stable moribund affairs into crazy, volatile, spiking, dipping, moving-all-over-the-place type markets. This is bad for everybody.” Everybody except traders on Wall Street, that is. While nearly one-seventh of the world goes hungry, they’re making plenty, and with little risk.

Kaufman had pieced together an answer to the question of how food gets its price, but conjecture is one thing and confirmation is another. Thus, his search continued. He talked to a Wall-Street-trader-turned-farmer, who told him the secret to making money (“buy at ten and sell at twelve”) and that economic collapse is imminent (“it’s going to come down to food, fresh water, and a shotgun”). Kaufman visited the Minneapolis Grain Exchange, where the CEO told him he was on the wrong track. The Goldman Sachs Commodity Index didn’t invest in the hard red spring wheat traded there, so how could it be driving up the price? At the Chicago Mercantile Exchange, Kaufman had a series of revelations about the relationship between investment and inflationary prices that confirmed what he’d suspected for some time: “Imaginary wheat bought anywhere affects real wheat bought everywhere.”

If there is no policy change, Kaufman expects another spike in the price of food, and soon. Because such spikes are historically associated with riots, uprisings, and revolutions, it’s less a question of whether civil unrest will happen than when and where. And food is just the beginning. The commoditization of water, which is already happening, will likely increase agitation. “What will be of value going forward?” asks Kaufman. “That has been a burning question since the financial crisis of 2008. That’s one of the reasons people pushed all their money into commodities and that’s one of the reasons why these markets went crazy with hundreds of millions of dollars of new money pouring into these markets. I think the consensus is—among the traders I know and the bankers and the economists I know—that arable land will be of value. Food will be of value. And of course, on top of everything is no longer gold or diamonds or dollars, but water. Water is going to be the most valuable commodity going forward and already there are some sample and test future markets being set up for water. Water will be commoditized. Water will be financialized. There is no question that that is coming.” But if we can change investment policy to stabilize the price of food, similar solutions might be used to regulate the price of water in the future.

Kaufman lives in the financial district, a block from Zuccotti Park. On evening walks with his dog, he watched the Occupy movement form and grow. As one might expect of a journalist, he stopped to converse with protestors, trying to get an idea of what was going on. “I soon realized,” he says, “the things I was thinking about were things that were their concern too.”

Bet the Farm is as much about Wall Street and the global economy as it is about food. Important as it may be to buy local and organic, consumer action alone is not going to stop speculators from driving up the price of wheat for most of the world. “There was a great emphasis ever since [Michael] Pollan and [Eric] Schlosser and a lot of those great food thinkers,” says Kaufman, “on consumer choice as being very powerful in terms of changing food systems—that would be a consumer choice toward local foods, and consumer choice toward organic foods. I am for all of that. However, one of the things I understood through my research for this book is that it’s that, plus. It has to be more. The government has to be involved, and there are a number of ways.”

To start, there must be increased regulation of banks and other investment entities not directly involved in producing or selling actual food. The Dodd-Frank Wall Street Reform and Consumer Protection Act, Kaufman says, “is trying to regulate that in kind of a slipshod manner, but is stumbling toward that.” It would not be difficult, says Kaufman, to revoke position-limit exemptions. These would not exclude traders from commodities markets but reinstitute the restrictions that had been in place from the 1936 Agricultural Act into the 1990s. Such regulation, says Kaufman, “limited the involvement of banks in the global price of food so that they could not make money on an investment that went up, when in fact as the price of food goes up globally that simply means that more and more people starve.”

Replenishing the nation’s strategic grain reserve is another part of a broad solution. “China has a huge grain reserve. India has a grain reserve. The United States has traditionally, ever since the Great Depression, had a strategic grain reserve. Under the Clinton Administration this was a farmer-owned grain reserve. It’s not like the government’s interfering in the farms. This is a very powerful entity when you have markets that are over-heated. You can bring grain to markets, you can settle them down. I don’t think anybody questions the validity or the necessity for a strategic petroleum reserve, right?”

The lessons learned from Occupy Wall Street can be incorporated into a viable solution as well. “As the movement matures,” says Kaufman, “and we move into the next stages of it and people start actually deploying their anger into actual policy recommendations—such as getting your money out of big banks, using community banks, using local banks—I think that the Occupy Food movement is really essential to moving forward. They have also understood that food financialization is an essential element of the global food justice movement.

“We also need to have more transparency in reporting in global markets,” Kaufman continues. “We need to understand how much each country is holding, how much grain Cargill is holding, how much grain Archer Daniels Midland is holding. Because of course when the price of grain starts to go up, people tend to hoard. It’s not as though there’s an impetus to the large holders of grain to bring grain to the market when the price is on the rise. This has been going on, really, since the days of ancient Greece and ancient Rome, when the grain-rich senators would sit on hoards, on endless medimnoi, of wheat as the price went up and up and up and the plebeians starved.

“Now, what can you and I do about stuff like that? What can we do sitting here on the street? Well we can really try, politically, to put it on the agenda of our elected officials, because these are legitimate roles of government both in terms of domestic policy and international policy. I think that part of the issue in the book is that the question of food is a complicated question. It’s a suite of complex decisions which marry food and money. Those two things are connected very intimately, and so it’s very important to understand precisely how those two things have now gone together and, if possible, to try to wrench them apart a little bit: to let money be money and food be food.”

Read more from Bet the Farm in The Complicated Relationship Between Food and Money.

Frederick Kaufman is a contributing editor at Harper’s and teaches at the City University of New York’s Graduate School of Journalism. He has written about American food culture for Foreign Policy, Wired, the New Yorker, Gourmet, the New York Times Magazine, and others. His new book, Bet the Farm: How Food Stopped Being Food, is available now.