Comments on: If we can’t prove that speculation drives food prices, should we regulate it anyway?

By: gaddeswarup

gaddeswarup — Sat, 09 Mar 2013 11:37:22 +0000

The paper linked earlier ‘Cereal Secrets’ seems to cover much the same ground.

By: Chris Alford

Chris Alford — Tue, 05 Mar 2013 20:48:44 +0000

Thanks for sharing – definitely agree with Stephen’s conclusion here, reminds me of an amusing David Mitchell video I watched a while back on Climate Change doubters

http://www.guardian.co.uk/commentisfree/video/2011/sep/15/david-mitchell-soapbox-climate-change-doubters-video

On a related note, isn’t there a much more established link between speculation and gasoline prices? From what I’ve read (and I could be wrong here, as the whole topic goes over my head a lot of the time), it seems to be a much more accepted cause-effect relationship amongst a much wider variety of circles than the link between speculation and food prices. But I wonder, what’s the difference between the two? Surely if people can accept that excessive speculation in petroleum markets can drive up oil prices then it’s not too big a jump from there to accept that it can also impact upon food prices? Or is there something that differentiates the two?

By: christian82

christian82 — Sat, 02 Mar 2013 13:15:29 +0000

I’m not yet convinced.
Reduced liquidity is a major concern, since liquidity is needed to get an informative price. A market economy can only function when prices indicate scarcity. There are futures markets without transactions over long periods. Thus, their old prices do not tell anything about the current needs of consumers.

I thought that the information function of prices is of particular value in developing countries. This was the idea behind Eleni Gabre-Madhins approach of establishing an Ethiopian commodity futures trading board. And as far as I have heard, this approached helped local farmers a lot. Futures market prices are communicated throughout the country, so Ethiopians now know how much their produce is worth when bargaining. I am not sure whether restricting liquidity would not simply make people blind for the severe fact that food becomes scarce from time to time. If prices are less informative on scarcity, policy measures to smooth food consumption might come too late.

By: Jodie Thorpe

Jodie Thorpe — Fri, 01 Mar 2013 13:43:19 +0000

Strong case for the precautionary principle – found this really helpful and informative! The table of winners and losers particularly caught my attention. Interesting in what it says about development agencies: favour low prices despite the fact that high prices benefit rural farmers! But in particular, the same point jumped out to me as to Liesbeth. Physical traders – at least the big ones – generally benefit from volatility in their physical business, but are also involved in speculative trading. For more background see “Cereal Secrets: The world’s largest grain traders and global agriculture”.

By: Liesbeth de Schutter

Liesbeth de Schutter — Fri, 01 Mar 2013 10:12:23 +0000

Thanks for sharing this great paper. The relationship between ecology and financial markets (through complexity science) is more than interesting. The only thing that keeps me chewing (but I am not a financial markets’ expert) is the role of the physical traders and if they could become ’super spreaders’ as the limited number of trading agents are both in physical trading, manufacturing as well as in hedge funds.
I also would expect these traders to benefit from high volatility (as any trader) and that gives them a mutual interest with financial markets.