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Food Commodities Speculation and Food Price Crises: Regulation to reduce the risks of price volatility

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The emerging speculation on food commodities will lead to a speculative bubble, says UN Special Rapporteur on the right to food, Olivier De Schutter. Sooner or later the bubble will burst - with people starving as a consequence. Institutions like the IMF, the World Bank, the EU and the UN must recognize that the financial speculation on the food market means gambling with human lives. Legal regulations are needed in order to reduce the risk of price volatility. Moreover, a fundamental reform of the global financial sector is needed. Food should not be regarded as a vehicle of speculative profits, but as an essential human right.

Report by Olivier De Schutter

September, 2010
UN Briefing Note

On the eve of an emergency FAO-meeting devoted to instability in agricultural markets, the UN Special Rapporteur published a study analyzing the impact of speculation on food price volatility.

In this briefing note, Olivier De Schutter examines the impact of speculation on the volatility of the prices of basic food commodities, and the possible solutions forward.

The study shows that a significant portion of the increases in price and volatility of essential food commodities can only be explained by the emergence of a speculative bubble. In particular, there is a reason to believe that a significant role is played by the entry into markets for derivatives based on food commodities of large, powerful institutional investors such as hedge funds, pension funds and investment banks, all of which are generally unconcerned with agricultural market fundamentals.

Link to full report.


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