Reference News Network reported on September 15 that according to the British "Financial Times" website on September 13, an article entitled "The Next Subprime Mortgage Crisis May Happen in the Food Sector" published by the British "Financial Times" said that the new crown epidemic may Caused food prices to rise and detonated the food crisis. The content is summarized as follows:

  Among all the problems caused by the new crown epidemic, the three most striking are food insecurity, the demise of small businesses and the turmoil in the asset market.

  The above situation may become worse due to major unexpected changes in the financial sector. Large banks including ABN AMRO Bank, Dutch Commercial Bank and BNP Paribas will either withdraw from commodity trade financing or reduce the scale of financing. This will result in funding gaps for some farmers, agricultural product producers and distributors, food chain stores and other small and medium enterprises, all of which are important parts of the global food supply chain.

  Michael Greenberg, a professor at the Carey School of Law at the University of Maryland and former head of trading and markets at the US Commodity Futures Trading Commission, said that this issue is like a huge iceberg beneath the surface of the financial market. Move towards it.

  He worries that if second- and third-tier agricultural companies-their transportation or manufacturing businesses rely on the above financing and use these financing to hedge the price risk of this turbulent industry-they will not be able to obtain funds or be forced to pay higher interest rates. Bank loans, then food prices may soar. He pointed out that we may also see an increase in corporate concentration and increased market risks in the next few months.

  Greenberg said: "Every commercial producer must buy futures contracts to hedge risks." He pointed out that the crop planting cycle takes several months, during which prices may fluctuate sharply. To hedge against risks, they may need short-term trade financing.

  If banks are only willing to provide loans to large and well-known companies, small and medium producers will be forced to seek help from shadow banks, which is already common. Coupled with the lack of transparency in such transactions because there is no single clearing house, it is almost impossible for lenders to know about situations such as where the borrower pledges the same collateral multiple times.

  There are already signs that the risk is approaching. Last spring, a series of commodity trading scandals occurred in Singapore (including the case where the founder of Xinglong Trading Company concealed a loss of US$800 million). This not only reflected the widespread fraud, but also highlighted the opacity, high leverage, and opacity of the commodity industry. Volatility has made it a high-risk area for large banks to operate their business.

  Given that banks are already under pressure, including higher capital adequacy ratios required by international regulations, coupled with new financial pressures brought about by the new crown pandemic, it is no wonder that many banks have decided to withdraw from this market or only do business with major customers.

  This intensifies an existing trend: the strong are stronger. Long before the epidemic broke out, in the agricultural sector, as in many other sectors, this trend had already appeared. But the new crown epidemic has exposed the fragility of the food monopoly, causing oversupply in some areas, and shortages and rising prices in other areas. A few large companies control areas such as meat packaging and food production, and they often only do business with one type of distributor-restaurants, but not food stores. This undoubtedly creates an economically "efficient" system, but this system is quite fragile.

  It is easy to imagine that later this year, if the supply chain is interrupted again, it will cause greater chaos and food insecurity. If a large number of highly leveraged agricultural companies go bankrupt at the same time, it may also trigger market turmoil.

  The demise of small farmers will not only have a knock-on effect on other industries such as packaging, manufacturing, and transportation, but their debt (especially if packaged into high-risk securitized products) may become a greater market risk.

  At least, given the rising cost of loans for a large number of producers, rising food prices are almost a foregone conclusion. This is not good news for many consumers who are already unemployed and struggling to make ends meet.