"Countries in the Middle East and North and Sub-Saharan Africa are most vulnerable to this global shock," read a report from the World Bank. "They have large food import bills, their food consumption is a large share of average household spending, and they have limited fiscal space and comparatively weaker protective mechanisms."
Meanwhile, the world's four largest grain companies-- Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus, commonly referred to as the "ABCDs," and which collectively control anywhere from 75 to 90 percent of global grain trade -- are still reaping massive profits amid the global food crisis, while doing little to improve food security where it is sorely needed.
While current data reflecting industry profits amid July's spike in prices are not yet available, past records show a general trend towards profit increasing along with food prices.
In 2011 when food prices peaked at record highs, ADM (NYSE: ADM) reported a net profit of $2.04 billion, a 5 percent increase, on revenue that rose more than 30 percent to over $80 billion. Privately-held Cargill's revenue rose to $119.5 billion (+18 percent) for the year, while profit jumped 35 percent to $2.7 billion. Bunge (NYSE: BG) experienced falling profit that year amid competition with the other companies, but still had net income of $942 million on revenue of 58 billion. Dreyfus does not disclose its profits.
In many developing countries, humanitarian food aid is a necessity. When food prices go up, these countries can't import as much and require more aid, while aid programs, having little choice but to purchase from the very same producers, spend more to provide less. In the end, the ABCDs retain their profits, while people often go hungry.
"They are profiting from markets that ought not be profitable. They do not have the public interest at heart," said Sophia Murphy, senior adviser on trade and global governance at the Institute for Agriculture and Trade Policy, a US- and Swiss-based a non-profit research and advocacy organization.
"It is necessary to recognize the oligopoly," she added, referring to when a market is dominated by a small number of sellers, like the grain sector is by the ABCDs.
Murphy was a consultant on a recent report, "Cereal Secrets," published by Oxfam -- an international confederation of organizations that advocates to end poverty and injustice globally -- that details how the ABCDs have cornered the market on food commodities and alleges they prevented the development of a more equitable and secure food system.
"Food prices, access to scarce resources like land and water, climate change and food security are all affected by the activities of traders," Oxfam Executive Director Jeremy Hobbs says in the report.
"As traders continue to exert a great deal of influence over the global food system, they should be held accountable to be responsible actors. Traders are a central node in the food system, within which large-scale change is necessary in order to ensure that everyone has enough to eat -- today and in the future."
The ABCDs are involved not only in the trading of food commodities, but also in their production and storage and, increasingly, investment in the industry.
"Today, banks and other investors, as well as dedicated investment funds established as subsidiaries of the ABCDs themselves, have invested billions of dollars in food commodities with no interest in taking possession of any physical commodity," the report reads.
"Their behavior is intimately linked to what is happening in the physical trade of food, of course, but it also affects that trade by affecting prices and behavior."
This is what is referred to as the "financialization" of the food commodities market, which essentially means that the ABCDs have a great deal of control in influencing the prices of the products they are trading in, as well as the ability to hedge on their investments to forestall market volatility.
"As a consequence, they continue to exert a great deal of influence over global food systems and over the lives and consumption patterns of farmers and consumers throughout the world," the report reads.
This is particularly troublesome in times of low food production -- which is becoming more common as climate change causes worse droughts and harsher weather conditions -- because the ABCDs have no incentive to keep food prices affordable despite humanitarian concerns.
"This makes volatility important: They know better than most what supply and demand are likely to be, and they make big investments every year in financial markets, using this knowledge to full effect," the report reads.
"Volatile prices are good for knowledgeable speculators."
Murphy believes that the food commodities market needs more effective regulation to reduce price volatility during food crises and to let countries develop better contingency plans.
One of her main suggestions is that countries be allowed to build up food reserves, which the ABCDs have lobbied heavily against, preferring to deliver no more than is needed at the moment for fear that reserves would hurt their future profits.
"Global food trade needs to rest on strong, resilient local food systems," Murphy said.
To this end, Murphy said an inter-governmental organization or system needs to be created to regulate the development of domestic food reserves in various countries to strike a balance between industry profits and food security and access.
There is strong resistance by the ABCDs to the development of such an organization. U.S.-based Cargill spent more than $2 million on political lobbying in Washington, D.C. in 2011 and has spent nearly $1 million so far this year.
Murphy said it will take the initiative of lawmakers to advocate for more effective regulation.
"For the people who are regulating this sector, if you don't acknowledge this [the need for more effective regulation], you are not going to develop rules that work," she said.