Speculation Blamed for Global Food Price Weirdness
Source: Wired Science
The link between commodity speculation and global food price weirdness just got stronger, and researchers warn that a new and potentially calamitous price bubble is imminent.
Previous research had blamed a combination of food-to-fuel crop conversion and financial speculation for driving food prices up in sudden, unpredictable spikes, independent of changes in supply or demand. But the market model used in those findings only explained trends retroactively. It didn’t test a prediction.
“People could say, ‘You must have fit the model to the data.’ Now we have this additional evidence, and people can see that we didn’t,” said Yaneer Bar-Yam, president of the New England Complex Systems Institute and co-author of the new study, which was released March 6 on arXiv. “This confirms that the model is very solid in its underpinnings. It says our understanding of what’s going on is right.”
'Unless they get speculators under control, there’s going to be a big bubble. It's a countdown to a real problem.'Since 2007, global food prices have surged twice, each time rising by more than 50 percent in less than a year, putting people in poor countries at risk and sparking social unrest around the world. Economists have argued over what drove the surges: Maybe it was bad weather, or changing dietary habits, or changing farming
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Is anyone surprised about what speculation does to commodity prices and then the question is, Why are we still allowing this to continue......???
= new reply since forum marked as read
Regulating food speculation is relatively straightfoward. WDM is calling for two key measures to be included in Europe’s proposals for financial reform:
Transparency – all futures contracts to be cleared through regulated exchanges. Most contracts are currently done in private, which means it is impossible to know how much of what is being traded. Contracts need to be brought out into the open, in the same way that shares are traded on the stock exchange.
Strict limits to be set on the amount that bankers can bet on food prices. Caps should be set on the amount of the market that can be held by the biggest players, and on the amount of the market that can be held by financial speculators as a whole.
If we get these two changes into place these markets will work better both for those who use them to insure against risk and for food consumers throughout the world.
http://www.wdm.org.uk/book/export/html/527
