What is the Problem?
The prices of groceries in supermarkets are on the rise. Unfortunately, there has been a disconnection between the actual value of food and its price, largely due to underexposed speculation. Despite lower inflation and energy costs, food prices have remained high, particularly following the Ukraine war.
In recent years, there has been an increase in the deregulation of financial markets since 2000. Although some regulations were implemented on commodity derivatives markets after the 2008 financial crisis, they were partially dismantled during the deregulation period amidst the COVID-19 pandemic. As a result, numerous new large commercial and financial players have entered the food markets.
Financial speculation, particularly through commodity derivatives markets such as futures trading on exchanges, is believed to be a significant factor in driving up food price volatility and overall prices.
What is the Solution?
In order to ensure that healthy food is available to everyone and that its price is not driven by financial speculation, it is important to inform and empower society to advocate for stronger regulations on food speculation. This means encouraging governments to pay more attention to the issue.
Unrestricted access and excessive speculation can lead to extreme price fluctuations, making it harder for poorer individuals, both in developing countries and even in wealthy nations, to afford food. To tackle this, we need to set limits on the positions that investors can hold. These limits would prevent financial investors from having too much influence on food prices. We should also restrict access to institutional and private investors who are not directly involved in the food industry. This way, those who have a genuine interest in food production and distribution can make decisions that are fairer for everyone.
It is also important to closely examine the financial products offered by insurance companies and banks. These institutions can contribute to speculative behaviour, which can negatively affect food prices. By regulating these products more effectively, we can reduce their potential impact on food prices and create a more stable and fair food system.
What is foodwatch doing?
Taking action, foodwatch launched a petition in mid-2022 to limit food speculation. Initially focused on the G7, the petition later adjusted its scope to target the G20 and EU. Some progress has been made since then. foodwatch continues its efforts by urging all national governments to enforce limitations on speculation in stock exchanges in alignment with foodwatch's demands.
The "Hunger Maker Report" by foodwatch from 2011 provides overwhelming evidence that food speculation on commodity exchanges drives up prices and causes hunger. With this report, foodwatch would like to contribute to the European Commission and the governments of Germany and the other EU states finally taking action and standing up to the financial industry and the agricultural industry.