Regulating Excessive Speculation: Commodity Derivatives and the Global Food Crisis

Abstract

Evidence suggests that commodity derivatives speculation contributed to extraordinary patterns of grain price volatility that led to a global food crisis in 2007–11. People in countries throughout the world are increasingly dependent on international commodity markets for access to food. Almost everywhere, now, the value of food is determined by a single condensed symbol of its worth—its price. Persuaded of the need to ensure that this measure of value is not put at risk of distortion in the pursuit of financial profit, governments in the US and in the EU are now implementing new regulations designed to curb ‘excessive’ levels of speculation in derivative markets. Carrying out an analysis of these regulatory measures, the article demonstrates that both sets of reforms suffer from a critical limitation: They are predicated on an inaccurate understanding of how activity in commodity derivative markets can impact on underlying food prices. If the new regulations for commodity derivative markets are not up to the task, as this article argues that they are not, a more fundamental revision of global economic structures may be required if the basic needs of human beings are not to be subsumed to the interests of financial capital in the years to come.

The Changing Drivers of Food Inflation – Macroeconomics, Inflation, and War

“…Speculation also affects food prices with an elasticity of 0.21, implying that financial speculators are overwhelming agricultural commodities markets and fuelling global food price inflation, likely resulting in a perverse effect on hunger and food security. This result supports previous analyses by Kornher et al (2022), Chadwick (2017), von Braun (2008, and others. Expansive monetary policies contribute to amplifying food prices, while a 1% appreciation of the dollar or a 1% rise in long-term interest rates determines a contraction of prices by 0.198 and 0.106%, respectively.…”

The Ukraine war and threats to food and energy security: Cascading risks from rising prices and supply disruptions

“…179 Instead, the G20 focused on market transparency (through the creation of AMIS) and regulatory frameworks remain weak. 180 Strategic grain reserves are a costly option for governments -operational costs of maintaining adequate storage infrastructure can be high, and the value of the reserves is subject to market volatility -but are critical to ensuring sufficient resources in case of a major supply disruption. 181 They can also provide a buffer in times of rapidly rising prices, buying governments some time to source supply from international markets at the best available price.…”

Introducción al monografico: Antropologías del hambre: La (in)seguridad alimentaria en contextos de precarización

“…Por otro lado, hoy no puede entenderse la inseguridad alimentaria en el mundo sin hacer referencia a la especulación financiera. La compra masiva de suelo fértil por parte de inversores extranjeros −agroindustria, gobiernos, fondos especulativos− ha provocado en el África subsahariana la expulsión de miles de campesinos de sus tierras, disminuyendo la capacidad de estos países para autoabastecerse (Chadwick, 2017). Por su parte, desde el estallido de la crisis en 2008 con efectos globales, los grandes fondos de especulación han emigrado de los mercados financieros a los de materias primas, incluidos los alimentos básicos −arroz, trigo, mijo, maíz y lácteos−.…”