Last month, IATP published a study examining the role of excessive commodity speculation by multi-billion dollar index funds in the rapid rise and fall of global food prices in 2007 and 2008. As lead author Steve Suppan explained, "The underlying fundamental for these funds is not the supply and demand of physical commodities, but the profit target. As long as Wall Street players could hide their government-permitted debt loads, they were free to induce price volatility in excess of what could be explained by fundamental factors, and then profit by betting on the induced price movements."
This week, a coalition of consumer, energy and agriculture groups (including IATP) sent a letter to President-elect Obama calling for greater regulation over excessive commodity speculation. Specifically, the coalition asked for greater transparency and accountability in market trading, including currently unregulated over-the-counter and off-shore trades, and more resources for the Commodity Futures Trading Commission. The coalition also called for greater coordination with international regulators.
For family farmers, suporters of sustainable and climate-friendly agriculture and those who are facing hunger, tougher regulation on speculative trading is absolutely essential. The extreme volatility in commodity markets has contributed to skyrocketing costs for farmers, losses in sustainably farmed land, and a dramatic increase in the number of hungry people around the world. Time for a change.
