In-depth research
WDM research
The great hunger lottery - WDM report showing how speculation on food impacts the poor, and what can be done about it.
Broken markets - WDM report showing that financial speculation has a clear impact on rising food prices and countering arguments to the contrary.
Barclays PLC and agricultural commodity derivatives - Report showing that Barclays Capital makes up to £340 million per year from food speculation.
Back to fundamentals (report) - WDM report explaining why position limits are needed to protect consumers, producers and businesses from the impacts of food speculation.
Back to fundamentals (briefing) - Policy briefing explaining why position limits are needed to protect consumers, producers and businesses from the impacts of food speculation.
Research by external economists and international institutions
The food crises: predictive validation of a quantitative model of food prices including speculators and ethonal conversion - Academic quantitative study finding that biofuels are causing a longer-term rise in food prices, while speculation has been responsible for the recent sharp fluctuations.
The relationship between commodities futures markets and food prices - Paper by economists Jayati Ghosh, Robert Pollin and James Heintz exploring whether greater liquidity contributes to more stable prices, and whether futures markets can affect food prices.
Agricultural outlook 2011-2020 - Report of the UN Food and Agriculture Organisation and OECD, which states that, "Almost all researchers agree that non-commercial participation in futures markets may amplify price movements in the short-term, even if they differ in their conclusions about other possible impacts."
The financialization of commodity markets - Report by the United Nations Conference on Trade and Development (UNCTAD) about the high increase in commodity prices accompanied by the growing presence of financial speculators in commodity markets.
Price volatility in food and agriculture markets: policy responses - Report by the UN Food and Agriculture Organisation (FAO) looking at volatility in commodity markets and what can be done about it.
Price formation in financialized commodity markets: the role of information - Report by the UN Conference on Trade and Development (UNCTAD) on the lack of information in financialised commodity markets.
Food commodities speculation and food price crises - Briefing note by Olivier de Shutter, the UN Special Rapporteur on the Right to Food, outlining the regulation needed to reduce volatility in commodity markets.
Placing the 2006/2008 commodity price boom into perspective - Research by the World Bank showing that commodity speculation may have been partly responsible for the 2006-2008 increase in food prices.
Excessive speculation in agricultural commodities - Collection of writings on food speculation from 2008-2011 put together by the Institute for Agriculture and Trade Policy.
The Hunger Makers - Report from Foodwatch on how Goldman Sachs and other financial institutions are driving up the price of commodities through speculation.
Barclays PLC and agricultural commodity derivatives report
This report, written by Brett Scott on behalf of WDM, is an overview of Barclays' involvement in commodity derivatives markets, with particular reference to its involvement in agricultural commodity derivatives (food speculation).
Derivatives come in three main types: Futures/forwards, options and swaps. In practice, a lot of the dealing on investment bank trading floors will be in ‘over-the-counter’ (OTC) derivatives, which includes forwards, swaps and bespoke options. Futures are slightly different, in that they are traded on regulated exchanges. All these derivative types can be based on different ‘underlying assets’ - e.g. derivatives based on shares, bonds and currencies, economic indicators, and a lot of other things. By far the largest global derivative market is the interest rate derivatives market, followed by currency derivatives, credit derivatives, commodity derivatives, and equity derivatives.
Barclays Capital commodities division is a commodity derivatives business, facilitating derivative markets in energy commodities (e.g. oil, oil distillates, natural gas, coal), industrial metals, precious metals, carbon emissions, and agricultural commodities. There are roughly 350 employees. Barclays describes the business as follows:
Barclays Capital’s Commodities division has expanded rapidly in recent years to meet growing customer demand. Our Commodities Traders build ‘trading books’ specialising in goods from energy products to agricultural assets, all over the world.
Broken markets - How financial market regulation can help prevent another global food crisis
Broken Markets seeks to counter the arguments put forward by those sceptical of the influence of financial speculation on rising food prices. It shows how financial speculation has boomed, turning commodity derivatives into just another asset class for investors, distorting and undermining the effective functioning of agricultural markets.
It shows how these changes in the financial markets translate into changes in the price of food, and the devastating impact this has had on the world’s poorest people. It concludes by recommending urgent action to introduce new rules to limit the influence of financial speculators and bring transparency and stability to these out of control markets.
The Great Hunger Lottery - How banking speculation causes food crises
In The Great Hunger Lottery, the World Development Movement has compiled extensive evidence establishing the role of food commodity derivatives in destabilising and driving up food prices around the world. This in turn, has led to food prices becoming unaffordable for low-income families around the world, particularly in developing countries highly reliant on food imports.
Nowhere was this more clearly seen than during the astonishing surge in staple food prices over the course of 2007-2008, when millions went hungry and food riots swept major cities around the world. The great hunger lottery shows how this alarming episode was fueled by the behaviour of financial speculators, and describes the terrible immediate impacts on vulnerable families around the world, as well as the long term damage to the fight against global poverty.
In the report we describe how the current situation came to pass, the risks of another speculation induced food crisis, and what specifically can be done by policymakers here in the UK as well as in the US and EU to tackle the problem.
