Banks such as Barclays and Goldman Sachs appear the villains of the potentially "irresponsible" wave of money which has driven food prices to record highs – and not hedge funds or speculators, anti-hunger campaigners have said.

Goldman Sachs, in comments to Agrimoney.com, disputed the allegations.

Short-term investors, which are usually the focus of attacks on non-commercial investment in agricultural commodities, "do not appear to be hugely culpable" of artificially inflating prices, Christian Aid said.

While guilty of isolated cases of "manipulation", the likes of hedge funds can - through a stance of taking counterintuitive positions, buying on weakness and selling on strength – dampen market volatility.

"If the markets do indeed share some responsibility for price hikes, then the bad guys are not the usual suspects – the hedge fund managers and cowboy speculators," the charity said.

Pension fund role

Instead, institutional investors such as pension funds have played an "unwitting" role in directing of billions of dollars into commodity investments, and indices that "so far [have] always delivered a return".

The wall of money from fund managers "more or less [guaranteed]… a profit in commissions" from investing in commodity indices may have distorted markets' response to supply and demand fundamentals, the charity said.

"It may be that some of the more prudent financial actors, institutional investors including pension funds, are responsible for helping drive up food prices globally."

'Anything but irresponsible?'

But Christian Aid saved its harshest criticism for the banks which created the commodity indices, whose price follows a basket of raw materials, for encouraging the emergence of the sector as an asset class.

"The investment banks that created the commodity indices in the first place can hardly be considered blameless," the charity said in a 108-page report on the causes of higher food prices and the spread of hunger.

 "These organisations not only created the indices and led the marketing that drove the enormous growth in food commodity trade… but were also the prime beneficiaries of the entire process."

Goldman Sachs "made" $1bn from its GSCI commodity index in 2009, while Barclays Capital "made as much as £340m a year from the food commodity side of the fund it runs", the report said, quoting data from the World Development Movement.

"The clearer the evidence becomes for real-world costs of the financial engineering that generates such profits for the middlemen, the more questions must be raised about whether the underlying business model is anything but irresponsible."

'No credibility'

However, a Goldman Sachs pointed out that it had sold its commodity index in 2007, to Standard & Poor's.

"Therefore, the World Development Movement 2009 profit estimate has no credibility," a spokesperson said.

The bank added that research by "respected international bodies like the OECD demonstrates clearly that long-term trends, including increased meat consumption by the growing middle class in the emerging markets and the increased use of biofuels in the developed markets, have created a backdrop for global food shortages.

"Our own research supports those findings."

Broken link?

The report said that the formation of commodity indices has "broken, or at least weakened" the link between investors and the commodity they are investing in.

"In addition, it has become apparent that given the huge sums of money people are prepared to invest, the existence of the index itself can influence the open-market value of the commodities it features.

"It would be startling indeed if the volume of financial flows to commodity markets had not had real impact."

* The World Development Movement on Tuesday issued a statement in response to Goldman's comments, saying its estimate for the investment bank's earnings from crops in 2009 was based on annual report data showing an overall figure of $5bn from commodities trading.

"If this was split in line with the proportions in the Standard & Poor's Goldman Sachs Commodity Index, this would indicate $1bn in earnings from food," the WDM said, acknowleding this was a "best-guess estimate".

"We would of course be pleased to cite the exact amount in future should the company wish to publish this data."