Excessive Speculation in Food Commodities

Excessive Speculation in Food Commodities

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Too many people still lack the food they need for an active and healthy life. The UN Food and Agriculture Organization (FAO) estimates that about 795 million people in the world – just over one in nine – were undernourished in 2014–16.

While the 2015 FAO report noted significant progress in fighting hunger over the past decade, it said that this progress should be viewed against the backdrop of a challenging global environment – including volatile commodity prices.

Since the deregulation of commodities markets in 2000, many investors with no interest in taking physical possession of food commodities have invested in commodity index funds. These speculators have come to dominate the commodities markets, which has led to drastic spikes and crashes in prices.

Pope Benedict XVI and Pope Francis have denounced expensive speculation in food commodities markets.  Speaking at the 2nd International Conference on Nutrition in November 2014, Pope Francis said: “It is also painful to see that the struggle against hunger and malnutrition is hindered by “market priorities”, the “primacy of profit”, which have reduced foodstuffs to a commodity like any other, subject to speculation, also of a financial nature. And while we speak of new rights, the hungry remain, at the street corner, and ask to be recognized as citizens, to receive a healthy diet. We ask for dignity, not for charity.”

Cathy and Mike RCRI 2015         Cathy at RCRI 2015

Several Tri-State CRI members have adopted investment guidelines to ensure that their financial resources are not used to speculate in food commodities.  TriCRI has background material to share with investment managers on this issue and sample language for adding a food commodities avoidance screen to investment guidelines.

Resources

ICCR’s Principles for Responsible Investment in Food Commodities: ICCR’s guidelines for institutional investors looking to responsibly invest in commodities.
Commodity Investing by Institutional Investors: An Agent-Principal Conflict. ICCR hosted this webinar by Mike Masters and David Frank in December of 2013 for investors.
Hedging Against Hunger: ICCR hosted a webinar illustrating the risks of over-speculation in food commodities, highlighting how the practice leads to dangerous spikes in global food prices. Listen  as multiple stakeholders share their insights (Note: webinar must be viewed in the web browser Internet Explorer to function properly).
If you represent an institution, this draft resolution on responsible food commodities investments may be of interest to your investment committee.
New England Complex Systems Institute study on the correlation between food prices and social unrest
What is the impact of commodity speculation on the right to food?