Food speculation mainly takes place at commodity derivatives exchanges, which are especially large in the US but also growing in the EU. Even though these exchange can have a value for agriculture, they can also be dangerous. Especially through increasing participation of finanical speculators like banks and funds, food prices more and more become a financial asset and an object of profit maximization. This can cause price distortions and increases - and thus hunger for millions. More information can be found in the article The speculator's bread. Also many scientists, analysts and public institutions have come to the conclusion that speculation can negatively influcence commodity prices (see list).
What needs to be done
To prevent financial speculators from generating profits at the cost of the poot, we need strong regulation of commodity derivatives markets. This includes:
• Trade on transparent exchanges or clearing houses
• High margin requirements for Over-the-counter trade
• Reporting and public reports
• Price oversight and price limits
• Prevention of excessive speculation through position limits
• Trading prohibition for institutional funds, mutual funds and for proprietary trading
• Control of the speculation by multinational commodity companies
• Transaction tax on commodity derivatives trading
The political debate
In the G20, French president Sarkozy has made food speculation a top priority. The G20 will decide on measure till the Cannes summit in November 2011. In the EU, the revision of the markets in financial instruments directive (MiFID) does play a major role. In Juli 2011, WEED and 13 other organisations have written a letter to internal market commissioner Barnier, calling for measures against food speculation within the MiFID revision. Another important reform process is the new EU derivatives legislation. WEED and other had an email action on this at the European website Make Finance Work.