Agricultural speculation: The law is finally enforced!
In these uncertain and anxiety-provoking times, one cannot be blamed for exercising a touch of patriotism, especially since (finally!) France is gaining fame in the fight against one of the 21st century scourges concerning agricultural issues––speculation and its distorting practices.
Since November 2008, we have in fact monitored renewed speculation in agricultural futures markets. While it is useful to cover market risks when it is reasonable, speculation turns to be a destabilizing factor when it becomes excessive. Confronted to a chaotic system marked by endogenous and exogenous uncertainty, uncontrolled speculation can intensify agricultural price volatility, and widely impact global food security.
Following the 2013 law to separate and regulate banking activities in France, banks did commit to curb their speculative operations in agricultural markets by shutting down some of their index funds or discontinuing all speculative activities in agricultural commodity markets. While these commitments had gone unheeded, the Autorité des Marchés Financiers (AMF) finally enforced the two articles of the banking law regarding transparency, and position limits were implemented on July 1, 2015. The NGO Oxfam France––whose efforts to enforce the provisions adopted three years ago have finally paid off––recently wrote an article we are publishing below in its entirety1, which acknowledges the major breakthrough represented by the full application of this French law.
The NGO also reaffirms that France must definitely play a key role in Europe. It can use its influence power, not only to improve transparency in European agricultural markets but also to assist in reviewing policies that are as disconnected from agricultural realities––such as our current CAP––or to weigh in crucial negotiations such as those involving the TTIP.
momagri Editorial Board
Two years after our “Banks, hunger is quite profitable for them” campaign and the adoption of a law to limit the banks’ agricultural speculation, the Government decided at long last to enforce the law!
Adopted in June 2013, the law provided that:
Starting on July 1, 2015, the Autorité des Marchés Financiers (AMF) must impose on financial stakeholders a ceiling on the number of contracts concluded on a given agricultural commodity within a given period;
Transparency on speculative operations in agricultural commodity derivative markets be strengthened through two measures to be implemented on the very day the law was adopted:
1/ Any person holding financial instruments, whose underlying comprises in all or parts of agricultural commodities, must declare his/her detailed positions to the AMF on a daily basis;
2/ The AMF must publish a weekly report including these aggregated positions.
A breakthrough achieved under pressure.
In February 2015, we wanted to find out the state of speculation in French agriculture, and check if both the Government and the banks were fulfilling their promises.
We published the results of our research in a new report entitled “Are French banks still speculating over hunger?”. Despite the banks’ promises and the adoption of the law, the conclusion was clear: There is still a great deal to be done.
The banks, which had promised to eliminate a portion of their funds contributing to speculation in agricultural commodities, had in fact launched additional funds.
The Autorité des Marchés Financiers had not implemented any of the transparency measures included in the law, and this full 18 months after the vote on the banking reform!
We also realized that the AMF had no intention to implement position limits as of July 1, 2015 as set by law, under the pretext of the ongoing European negotiations. A poor excuse since, on the contrary, by applying its own legislation, France would gain an influence position in its negotiations!
The banking reform thus had gone unheeded… We demanded that the Ministry of Finance and the Autorité des Marchés Financiers enforce the law. Under pressure and prior to the publication of our report, the AMF hastily initiated, in December 2014, the modification of its general regulation to finally enforce the law: The two articles of the banking law regarding transparency are already enforced today. As far as the position limits are concerned, they were finally implemented on July 1, 2015, as initially required by law.
Will Europe follow the French example?
The French law is a major breakthrough, as it imposes strict limits to the banks’ speculative practices, and improves the transparency of agricultural and food markets.
Thanks to this law, France is playing a pioneering role within the European Union, and thus must be able to strongly and positively influence the European negotiations.
In April 2014 and following long years of discussions within the EU, the European Parliament passed a reform––the Markets in Financial Instruments Directive (MIFID). This legislation imposes position limits in European agricultural commodity derivatives markets. In this context, France was able to use the example of its own national legislation, and influence European negotiations with other stakeholders, which, such as the United Kingdom, were extremely opposed to the implementation of such ceilings. Yet, this European victory is still incomplete.
Now, member states must agree on the implementation. The discussions––which were the AMF’s reason not to act in France––are ongoing. If the balance of power is not in favor of a really bold reform––these negotiations could undermine the legislation passed by the European Parliament.
In all cases, the European legislation will overstep national legislations. In practical terms, this means that if the measures enforced at the European level are less impressive than those adopted in the framework of the French banking reform, all the efforts undertaken at the French level and all the gains achieved under Oxfam France’s pressure will be destroyed.
Crucial steps must be followed
In France, the banking reform is an advocacy victory for Oxfam France: We were successful in turning a political nonissue into a bold and enforced law.
At the European level, the stakes are extremely high. While the ongoing discussions are slashing the aspirations of the MIFID reform, all the results achieved in France could be jeopardized. As a stakeholder in the current negotiations, the AMF must absolutely intervene, so that the European reform is at least as bold as the French law.
All this will play out over the coming months since the legislative text must be adopted in September 2015. The European Parliament will not be able to amend this proposal but only to completely reject it, if its feels it totally distorts the spirit of the text voted on April 2014. Such option could be considered, and we are already talking with our European partners and the EP members who support such bold reform, but this would postpone the outcome of a process initiated in October 2011. In the meantime, speculation prevails!
1 The entire article is available from: