The EU recently made a decision to curb speculation on food prices. The decision puts limits on the use of financial instruments related to agricultural commodities that have been blamed for food price rises.
According to Olivier de Schutter –special rapporteur on the right to food of the United Nations- food speculation (pdf) by hedge funds, pension funds and big investors led to increased food prices.
According to the anti-poverty group World Development Movement (WDM), Barclays, Deutsche Bank, Goldman Sachs, JP Morgan and Morgan Stanley together made anestimated £2.2bn from speculating on food, including wheat, maize and soy, between 2010 and 2012.
It is a disgrace that institutions and people that are not at all involved in the production of food bet on hunger and take a big profit.
The new EU controls will place a limit on the number of contracts on agricultural commodities such as wheat, corn, soybean and sugar that banks and other finance companies can hold, and will force traders to open their activities to greater public scrutiny (source).
The controls would according to the European Commission “contribute to orderly pricing and prevent market abuse, thus curbing speculation on commodities and the disastrous impacts it can have on the world’s poorest populations”. The controls also aim to ban unregulated trading and establish tighter rules for computer high-frequency trading.
The decision by the EU has been welcomed by development activists but they have also warned about loopholes in the regulation after opposition by the UK government due to pressure of the financial sector. For instance, limits will be set at a national level, not at the EU level.
Nevertheless this is a historic step which hopefully put an end to speculation on food prices. It will hopefully also lead to lower and fairer food prices and will help to combat hunger in the world.