A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
A look at the news

Commodities: An investment becoming increasingly “unprofitable” for banks

April 28, 2014

On April 22, the British bank Barclays announced it is withdrawing from physical markets, thus closing down its brokering operations in most commodities, such as agricultural commodities, energy products and industrial metals. Consequently, Barclays joins other banking institutions––following the example of Deutsche Bank––that got out of the commodities brokering business.

At issue is the ever-weightier consequence of international regulations, especially the pressure from some major international organizations to limit excessive speculative operations in some markets, as well as declining profits.

Speculation in commodities markets might therefore become increasingly less “profitable”. That is a good thing at a time when agricultural commodities are now an investment among other options in portfolio management strategies.

In addition, this withdrawal is occurring when consensus views are arising to recognize that speculators’ positions on agricultural futures markets have partly fueled the soaring food prices in the spring of 2008. The excessive and unregulated financialization––driven by the highly unrealistic belief in market forces––has indeed fostered the expansion of speculative behaviors that were stimulated by a very short-term vision disconnected from reality. Ultimately, such behaviors became a factor to destabilize prices. And such destabilization not only affects agricultural operations, but also weakens global food security.

Barclays’ withdrawal from commodities brokering operations––which was already announced in February 2013––might represent a first step towards a lull in speculation in agricultural derivatives markets. Yet it is profitable for trading firms and Asian or South American banks, or still Russian or Middle-Eastern supply businesses that are less regulated and less transparent.

So a victory in fighting market misuses and wrongdoings is far from won, especially from Asian or Anglo-Saxon banks and trading houses. In this context, it is crucial that the international community continues to work and cooperate in issues of regulations to prevent the development of an “agricultural bubble” whose consequences would be as devastating as those reported during the financial crisis.

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Paris, 24 June 2019