The world needs to take a hard look at speculation on the financial markets and its potential impact on food price volatility, FAO Director-General José Graziano da Silva said today at a high-level debate on the issue at FAO Headquarters in Rome.
"While there has been much analysis of food price volatility, including at FAO, more understanding is still needed, especially concerning the impacts of speculation," Graziano da Silva said as he opened the event.
"Let's make one thing clear: We are not talking about speculation related to price discovery and the normal functioning of the futures markets. We are talking about excessive speculation in derivative markets, which can increase price swings and their speed," he added.
"Excessive food price volatility, especially at the speed at which they have been occurring since 2007, has negative impacts on poor consumers and poor producers alike all over the world."
A UN debate in April 2012 provided an opportunity for Heads of State and Government, along with other high level officials and international organizations, to discuss the issue at a political level, while the FAO event took the process a step further. It looked, specifically, at the extent to which speculative behavior on commodity futures markets was contributing to food price volatility. It also focused on associated regulatory issues.
"The view that speculation contributed to recent price volatility has led to more awareness among governments on the need for the introduction of greater regulation to limit this activity. However, the question of how much and what form of regulation is polemic," Graziano da Silva said.
In recent years, especially since 2007, the world has seen the reversal of a four-decade-long downward tendency in prices of agricultural commodities. The period between 2008 and 2011 was characterized by a series of extreme peaks and valleys in food pricing which made it especially difficult for economically vulnerable consumers and agricultural producers to cope.
"Food price inflation has already been higher than overall inflation in almost every country. This has a greater impact on the poorer population, who can spend up to 75 percent of their income in food," Graziano da Silva said.
Friday July 6, 2012/ FAO.