“The volatility of food prices has been the subject of much analysis [...] but a better understanding of the phenomenon is required, in particular the impact of speculation.” Declared José Graziano da Silva, Director-General of the FAO at the opening of a high-level meeting devoted to the subject on 6th July at FAO headquarters.
In recent years, in a context marked by high volatility in agricultural prices, major food crises and the growing financialisation of agricultural markets, the impact of speculation on agricultural prices is at the heart of the concerns of the international community. The G20, under the French Presidency also devoted much time to this question.
If the subject remains controversial, more and more experts are agreeing that excessive speculation plays a role in agricultural price volatility and that it must be monitored. At the meeting, José Graziano da Silva distinguished speculation related to pricing and the normal functioning of futures markets, from “excessive” speculation, “which is likely to intensify price fluctuations and their rapidity.”
It is clear, in fact, that the increasing financialisation of commodity markets over the last twenty years, in a context of deregulation has been accompanied by the uncontrolled growth of speculation in these markets and rising volatility in agricultural prices.
Therefore, if futures markets can play a role in the correct functioning of agricultural markets in terms of liquidity and the management of certain risks, speculation in these markets must be regulated to avoid it from becoming another source of instability.
The European Union, the United States and India are strengthening their legislation accordingly, establishing position limits, standardization of contracts and an obligation to register transactions on OTC markets. It remains essential that such measures form part of a comprehensive and coordinated international approach to guarantee their effectiveness.