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

High Frequency Trading:
an illustration of “turn to crime” finance

April 27, 2015

“Over the past twenty-five years, volatility in one day has never been more important”, deplored the International Monetary Fund (IMF) in its half-yearly report on financial stability. Reduced liquidity on foreign exchange and bond markets, crushed interest rates while the real economy is floundering... the financial world is in fever pitch, particularly exacerbated by the development of derivatives on markets and related operations, such as High Frequency Trading.

For the IMF, in parallel with the automation of financial platforms, it is precisely the growing development of “high frequency trading” (very quickly buying and selling options via computer algorithms) that weighs heavily on market stability.

Yet, the activities of these powerful virtual market operators are the perfect illustration of the growing disconnect between the real economy and the financial sphere, especially true for agricultural commodities. 75% to 85% of transactions on wheat do not pass through Chicago, but on over-the-counter markets. The number of agricultural “futures” contracts traded daily on the Chicago Board of Trade (CBoT) has more than tripled since 2000. More generally, the notional value of derivatives (that is to say, the face value that appears on contracts for these products) has now exceeded its level of before the subprime crisis. At the end of 2013, it amounted to $710,000 billion, against $684 000 billion in the first half of 2008, according to figures from the Bank for International Settlements (BIS). The equivalent of ten times global GDP, against three times global GDP fifteen years ago.

At a time when the US and European regulatory bodies are trying to renew themselves, this manipulation is further proof of the opacity and dysfunction of derivatives markets and detrimental behaviour, particularly if they spread to agricultural commodities, directly involving the food security of billions of people.

Consequently, the out of control, erratic development of the last twenty years of over the counter markets (OTC), resulted in excessive speculation in commodity markets, including agricultural, and consequently hyper-volatility on food prices, causing the food crisis of 2007/2008.

Neither complex algorithms nor an invisible hand can guarantee the stability of agricultural markets, especially in an unstable, volatile and unpredictable world. Yet, faced with the consequences of an excessively financialized agriculture, we risk a future agricultural bubble. Is this what it will take before we finally realize the urgency of reforming the architecture of global finance?

Page Header
Paris, 24 June 2019