News 03.07.2014

75 per cent of stock exchange practitioners think speculation does influence food prices

Three out of four people working on stock exchanges believe that financial speculation directly influences the price of food. This finding has emerged from an international survey carried out by market research institute SIS International Research on behalf of the German office of consumer rights organisation foodwatch.

The study involved the questioning of a total of 180 experienced commodities traders, brokers and analysts from Germany as well as from the financial centres of Chicago, New York, London, Tokyo, New Delhi, Shanghai, Dubai and Abu Dhabi. Of these, 89 per cent stated that financial speculators influence futures prices on futures exchanges. A total of 75 per cent of those questioned go further, saying that these effects can then also impact on the prices of food and crude oil (and thus likewise indirectly affect food prices). This opinion is shared by the two Deutsche Bank employees questioned, although this contrasts with the official line of the bank’s top management. One of them stated that speculators could „systematically“ and „on a sustained base“ drive commodity prices.

„If science, with its econometric models, is unable to deliver conclusive findings, you should simply go and ask the people who work on commodities exchanges every day. A huge majority of stock exchange practitioners are convinced that speculation can drive up food prices – and this alone should prompt banks to pull the plug on it to be on the safe side,“ explained Lena Blanken, economist at foodwatch.

In Germany, Deutsche Bank is the last remaining bank to still cling to food speculation. Co-Chief Executive Officer Jürgen Fitschen argues that there is no convincing proof that financial speculation influences food prices. The survey among practitioners proves that large sections of the financial world take a different view. For its part, Deutsche Bank has not yet made public which studies or other findings it bases its position on.

In the opinion of foodwatch, the banks cannot escape the following facts:

  • Science has not yet managed to reach a consensus on whether financial speculation influences prices – but many studies show strong indications that it does.
  • Even research departments of financial institutions like Deutsche Bank and Allianz assume that speculation excesses have led to price increases in the past, for example in 2007/2008, in their studies.
  • A study published in March 2014 by German state institution the Thünen Institute on behalf of the federal government revealed that farmers, agricultural traders and the food industry look to the futures exchanges for guidance when setting prices for agricultural commodities. This shows that the development of the derivatives markets is carried over to the prices of physical goods.
  • The current survey of commodities traders, brokers and analysts shows that the majority of stock exchange practitioners assume that financial speculation influences the prices of food products.

„There are strong indications from studies and overwhelming proof from practice that speculation excesses cause food prices to rise,” says Lena Blanken of foodwatch. “Anyone who fails to take this on board is acting extremely irresponsibly. It’s time to put a stop to people going hungry due to financial speculation.”

Background:For this study, the US market research institute SIS International Research, commissioned by foodwatch, questioned 20 commodities traders, brokers and analysts from Germany and each of the financial centres of London, Chicago, New York, Shanghai, Tokyo, New Delhi, Dubai and Abu Dhabi by telephone in March and April 2014. The respondents had to be stock exchange practitioners working in the area of commodities with at least four years’ experience. They responded to two questions:

  1. Do speculative activities in commodity futures markets have an influence on the futures prices for commodities (e.g. agricultural commodities and crude oil)?
  2. If so, does this distortion in futures prices affect the spot prices?

[NoTranslation for en]