“Financial Derivatives, their Impact on Food Security and Regulation Attempts

Abstract

The consequences of the financial derivatives speculation on food commodities have been gradually clarified. The article emphasizes the excessive speculation and deregulation that took place after 2000, arguing that factors affecting supply and demand cannot explain alone the extreme price volatility and the price increases in food commodities since 2007. The financialization of agricultural markets prevents that farmers and traders can use the futures market as a hedge, and seriously harm consumers, especially in the poorer States. Adding to this, highly volatile agricultural prices lead to lower profits for farmers,, discourages investment, innovation and the pursuit of higher productivity in agriculture. The article explains the regulation of commodity derivatives markets that has taken place in the U.S. and the European Union, and the role of the G-20.