November 15, 2008

Report Concludes Specualtion A Major Contributor To Higher Food Prices

A new report from the Institute for Agriculture and Trade Policy has concluded that excessive speculation is a major reason for the rapid rise in commodity prices.

The IATP report, “Commodities Market Speculation: the Risk to Food Security and Agriculture”, concludes that U.S. government deregulatory steps opened the door for large financial services speculators to make huge “bets” that destabilized the structure of agriculture commodity markets. According to the United Nations, global food prices rose an estimated 85 percent between April 2007 and April 2008. Prices rose for wheat (60 percent), corn (30 percent) and soybeans (40 percent) beyond what could be explained by supply, demand and other fundamental factors, the report found.

This puts in doubt the report from the World Bank earlier in the year that said that biofuels were responsible for 75% of the global rise in food prices. In their report they concluded that biofuels pushed food prices up in part through encouraging speculation. But the fact that commodity prices have come down by about 50% while biofuels production continues to climb shows that to be a false assumption.

Report : Commodities Market Speculation: the Risk to Food Security and Agriculture

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