A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Pierre Pagesse.
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.
Personal accounts

“Speculative Funds: Food is not a Game”

An interview of Professor Bertrand Munier,
momagri Chief Economist,
published in early May in the Imagine magazine

In a recent interview granted to the magazine Imagine (www.imagine-magazine.com), Professor Bertrand Munier, momagri Chief Economist, warns that banks and investment funds might bring about a new subprime mortgage crisis, with farmers singled out for punishment.

As the US Senate currently looks in great detail into the role played by Goldman Sachs in the latest financial crisis, the list of charges might have to be rounded out, given that the activities of Wall Street’s largest bank in the 2008 food crisis are so unclear. As indicated by Bertrand Munier, the bank would be the first to have intervened in agricultural commodity markets, using their counter-cyclical nature to cover financial risks. And this in defiance of the generated domino effect… and the risks of provoking a new crisis, if market prices are not allowing farmers to pay their debts.

We highly recommend reading Bertrand Munier’s interview in the latest issue of Imagine, which emphasizes the urgent need to regulate the financialization of agriculture. We are excerpting below a few sections of the text.

momagri Editorial Board

Excerpts from Bertrand Munier’s interview “Speculative Funds: Food is not a Game!” in the May-June 2010 issue of the magazine Imagine.

“Banks have a considerable stranglehold on oil and agricultural commodities,” observes Bertrand Munier, Chief Economist at momagri, the French think tank that campaigns for the regulation of food products markets. “We do not have absolute proof that such speculative game does exist but, just as in a police investigation, we have so many corroborating evidence that doubt is no longer an option.”

Speculation in agricultural products has been going on since the dawn of time. It is essentially used to pre-finance upcoming crops. And why not, if it provides farmers with the means to launch the next harvest? For the past ten years or so, the financialization of agriculture has taken alarming proportions. According to Bertrand Munier, Goldman Sachs was the first to turn up on agricultural markets back in 2001. Analysts from the most profitable Wall Street bank had noticed that agricultural commodity prices were fluctuating inversely to stock prices. When the former rise, the latter mechanically decline, and prices of production inputs shrink the outlook for industrial growth. Goldman Sachs thus began to systematically take positions to cover risks in stock portfolios.

“Such negative correlation can no longer be necessarily verified today,” states the economist, “but investment funds made a practice to take positions on agribusiness markets. Out of 20 transactions, 19 are now strictly financial deals, against only one effectively translating into a physical delivery. Financialization in futures markets is a key phenomenon, which has tripled during the past few years.”


The financial community––starting with the IMF and the World Bank––is hesitant to acknowledge their role in the food crisis. For want of proof, or out of respect for the free-trade dogma that considers markets to be the perfect reflection of reality, asserts Bertrand Munier.

A question of life or death

However, such resistance to change triggers the wrath of some observers, who point out that the food crisis was preceded by a surge in the numbers of speculative contracts on basic commodities. (…) The interference of financial funds necessarily clouded price setting. Others are outraged by practices of some banking institutions that clearly surf on the food crisis to attract new clients. In February 2008, the Belgian bank KBC was presenting the public at large with a life insurance plan focusing on six food commodities with the slogan “Take advantage of price increases”. This type of initiative was far from an isolated occurrence. In Germany, the Deutsche Bank also proposed a specialized fund advertized with an identical sales pitch: “Profit from increased prices with Agriculture Euro Fund”.

In a merciless analysis published last spring, the UNCTAD1 went through the behavior of agricultural market traders with a fine-toothed comb. According to the Agency, speculators, whose job involves guessing future prices, are upsetting food prices by extrapolating, from the agricultural sector, data that is outside their field of expertise. In other words, they transform any economic occurrence into a food commodity upsurge or collapse. For instance, skyrocketing real estate prices in Latin America lead to soaring corn prices because of speculation. Why? Because, supported by algorithms and statistics, some traders are prefiguring that Latino-American real estate is correlated to corn prices. Thus, some traders buy positions on this cereal crop. Then, with sheep like behavior, other traders follow suit and corn effectively becomes prohibitive, regardless of crop expectations or factual needs. “Given the fact that food prices can be a question of life or death for millions of poor people in the world, such speculation is not acceptable,” concludes the Agency.

The next economic crash

Following the stock market crash and the food crisis, the United States, the United Kingdom and Germany now prohibit short sales of certain products. (…) But with what result? “When a practice is prohibited in a given country, nothing prevents anyone to pursue it elsewhere,” retorts Bertrand Munier2 . “If we want to discourage speculation, we must make it expensive. And not only by applying a Tobin-type tax, which is minimalist. We must enact compulsory security deposits for futures transactions, thus removing any leverage. In addition, public authorities must make sure that operators comply with such deposits, by threatening them with substantial fines.”3»

The reason why the economist is so incensed about speculation in agricultural markets is because he suspects it prepares for what could be the next financial crash… this time coupled with a food crash. “We are running the risk of another subprime mortgage crisis,” blurts out Bertrand Munier. “Farmers present a similar profile to that of subprime loan borrowers. They do not know the price of the next crop and get high rate financing, since they present risky profiles. But nothing prevents them from contracting loans from international markets through operators betting on a new hike of agricultural prices. Just as American households obtained loans not based on their repayment abilities, but on anticipated capital gains on their real estate. Put farmers into debt, then resell their debts through financial instruments and, in time, the financial markets will realize that their debts are worth nothing.”

Published since 1996, Imagine is a Belgian-based publication that seeks alternative solutions to address major societal issues.


1 The United Nations Conference on Trade and Development (UNCTAD) is an agency specialized in the protection of the trade interests of Southern countries.
2 Moreover, Bertrand Munier indicates that it is always possible to contract other risky financial products, such as options that are almost impossible to cancel, as 90 percent of them are traded informally and beyond any control.
3 Security deposits prevent any speculation with empty pockets.
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Paris, 17 April 2014