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Speculators are earning huge profits from betting on food prices in unregulated financial markets. This creates instability and pushes up global food prices, leaving millions of people facing hunger, malnutrition and deeper poverty.

Food speculation explained in 7 minutes:	AlJazeera on food speculation:
"Voices of our world" podcast on the food bubble with Michael Greenberger, David Kane and Adam White:

Banks, hedge funds and pension funds are betting on world food prices, causing drastic price swings in staple foods such as wheat, maize and soy. In 2007-8, there was a huge rise in food prices, for example the price of wheat shot up dramatically by 80% and maize by 90%. Global food prices then fell rapidly in the second half of 2008. And its happening all over again in 2011 as food prices are now at the same levels that they were at during the height of the 2008 global food crisis.

There are real world factors that are behind some of the price rise, like the increased use of biofuels as crops or changes in crop yields caused by climate change but these are causing a gradual upward trend, the price spikes of 2007-8 and 2010-11 can only be explained by the excessive speculation in financial markets on food prices amplifying the price movements.

Food price rises hit the poorest the hardest as they spend a greater proportion of their income on food and millions are being pushed into deeper poverty. Excessive speculation needs to be regulated to stop massive price hikes in staple foods which are so disastrous for the world’s poor.

The campaign to stop bankers from betting on hunger is calling for regulation to curb excessive speculation on food prices in financial markets.

In a nutshell:

What is food speculation?

• Food speculation refers to bankers and other financial investors betting on food prices.
• Food speculation occurs if ’futures contracts’ are written for the sole purpose of money making. Originally, future contracts allow farmers to sell crops at a future date at a guaranteed price - helping them to overcome unforeseen variations in crop production.
• Over the last two decades, bankers have successfully lobbied for weaker regulations on food speculation. They are now able to buy and sell futures contracts to make money.
• Bankers have also created special products and funds to help other financial companies make money from betting on food.

Why is food speculation bad?

• Betting on food prices creates huge market instability and increases food prices.
• Rising food prices leads to hunger and malnutrition for poor people across the world.
• Poor households, forced to spend more money on food, are less able to afford other essentials such as healthcare and education.
• People are forced into deeper poverty and debt and are therefore more likely (particularly women) to take on dangerous jobs such as becoming sex workers.

Read more:

• Civil society urges EU to curb food speculation: Joint position on EU financial markets regulation
• International Call for Immediate Action on Financial Speculation on Food Commodities: Stop Gambling on Food & Hunger
• UK campaign to limit commodity speculation
• Regulation and supervision of (agricultural) commodity derivatives markets are being legislated in the EU
• Evidence on the Negative Impact of Commodity Speculation by Scientists, Analysts and Public Institutions
• WEED Factsheet Food Speculation

Studies and reports:

Harald Schumann, Foodwatch (2011): The Hungermakers	World Development Movement: "Hunger Lottery" How banking speculation causes food crises (Report, 2011)	World Development Movement: "Betting on Hunger" The reality of high food prices (Report, 2010)	SOMO (2010): Financing Food
Henn, Markus (2011): The speculator’s bread	Baffes, John / Tassos Haniotis (2010): Placing the 2006/08 Commodities Boom into Perspective	Lines, Thomas (2010): Speculation in food commodity markets	Silvennoinen Annastiina / Susan Thorp (2010): Financialization, crisis and commodity correlation dynamics
Tang, Ke / Wei Xiong (2011): Index Investment and The Financialization of Commodities	United States Senate, Permanent Subcommittee on Investigations (2009): Excessive Speculation in the Wheat Market	Olivier de Schutter (UN Special Rapporteur on the Right to Food) (2010): Food commodities speculation and food price crises

EU reform process:

WEED: EU regulation commodity derivatives

Factsheet Markets in Financial Instruments Directive (MiFID) and Regulation (MiFIR)

More Reading:

• UN approves Dominican leaders stance against financial speculation
• World Development Movement, December 2011: Tackling hunger and protecting consumers - Curbing excessive speculation on food.
• Bloomberg on speculative distortions in the aluminium market

See also the U.S. coalition STOP GAMBLING ON HUNGER

Press release // European Commission’s proposal for financial markets lacks teeth. More robust rules are needed to tackle food speculation // Brussels, October 20, 2011 – New rules proposed today by the European Commission will shed light on betting on food commodities by financial traders, but will not do enough to prevent speculation from fuelling high and volatile food prices. The warning comes from environment and development groups in a joint reaction to the new draft Markets in Financial Instruments Directive (MiFID II) and accompanying regulation.

The proposed reform, to be debated by the European Parliamant and EU member states in the coming months, allows for limits on the number and size of bets that traders can make when buying and selling futures contracts (so-called ‘position limits’) in an attempt to restrict the impact on prices of commodities such as wheat or soy, and tightens up on harmful ‘high frequency trading’. However, the Commission’s proposal falls short of tackling food speculation head-on. It includes too many exemptions, allows EU member states to create ‘alternative arrangements’ to position limits and does not go far enough to clamp down on speculation that is divorced from supply and demand. (...)

• The Ecologist film on food speculation: