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

The psychology of financial players and agricultural
price volatility

16 January 2012

At a conference last 7th December organised by the InVivo Cooperative Group on the theme "Agriculture and Finance: Who rules the grain world?"1 Thami Kabbaj, trader and associate professor of economics, said that "trader psychology [was] decisive" on agricultural financial markets.

At a time when financial players are increasingly more involved on the already structurally volatile agricultural markets, this finding is of fundamental importance.

As stressed by Thami Kabbaj, the behaviour of financial players is indeed far from rational in a context of inadequate information and high uncertainty. Because no one has all the elements for assessment, evaluation is subjective and player behaviour is marked by mimetic reactions and emotional biases.

This behaviour has an impact on the volatility of agricultural prices. As we noted in a previous article2, the simple analysis of market fundamentals on physical markets by means of explaining agricultural price volatility has its limits. The psychology of players involved in financialised agricultural markets has an increasingly important role in the formation and evolution of prices and contributes to exacerbating the structural volatility of agricultural prices.

Agricultural markets have become complex markets of anticipation for which adequate regulatory mechanisms must be set up to improve market transparency and regulate the activity of financial players3.

U.S. and European regulators are currently reinforcing their legislation to this effect, but it is essential to extend regulation to OTC markets on which the majority of transactions take place, and to ensure that other financial centres adopt similar measures to avoid “lowest bidder” policies on an international level.

1 http://www.invivo-group.com/actualites/128/finance-et-agriculture-qui-gouverne-le-monde-des-grains
2 Please see « The Financial Times links volatility with the psychology of market players » : http://momagri.fr/UK/a-look-at-the-news/The-Financial-Times-links-volatility-with-the-psychology-of-market-players_917.html
3 Please see momagri’s ten proposals to regulate speculation on agricultural commodity markets : http://momagri.fr/UK/points-of-view/momagri-s-ten-proposals-to-regulate-speculation-on-agricultural-commodity-markets_948.html

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Paris, 24 April 2019