Banks scale back food commodity speculation

May 9, 2015

This week, Austrian bank Volksbank AG became the latest of several European banks to announce it is either ending or scaling back investment funds for food commodities. Others include Deutsche Bank, which said in March it was reviewing the "causes and effects of highly volatile, and above all, rising agricultural commodity prices". .... Critics would argue that we're facing a Malthusian-esque supply and demand problem. Certainly, one cannot attend a talk on food by a UK government minister without hearing, again, that the world needs to produce 70% more food by 2050 from less resources to feed an expected population of 9bn. It's also worth highlighting that only around 10% of crops are traded across borders. However, there is growing consensus that speculative trading is part of the equation. Investments in food commodities have risen from US$65bn to $126bn over the past five years, according to United Nations figures. This might have slipped more easily under the radar had general commodity prices not risen by 147%[[ in real terms. from McKinsey report Nov. 2011]] over the past decade, leading to an era of volatility and pressured profit margins. "There can be no doubt that speculative activity does indeed have some effect on commodity pricing," the commissioner of the US Commodity Futures Trading Commission (CFTC), Bart Chilton, said in a speech earlier this year.

 

Source: Chris Mercer, "Comment:Banks scale back food commodity speculation," Just-Food. August 17, 2012. http://www.just-food.com/comment/banks-scale-back-food-commodity-specula... [verified 4/22/14]

Please reload