# Food speculation > Mediated Wiki article. Canonical URL: https://mediated.wiki/source/Food_speculation > Markdown URL: https://mediated.wiki/source/Food_speculation.md > Source: https://en.wikipedia.org/wiki/Food_speculation > Source revision: 1222831811 > License: Creative Commons Attribution-ShareAlike 4.0 International (https://creativecommons.org/licenses/by-sa/4.0/) {{Short description|Financial market}} '''Food speculation''' refers to the buying and selling of [futures contract](/source/futures_contract)s or other [commodity derivatives](/source/Commodity_market) by [traders](/source/Trader_(finance)) with the aim of profiting from changes in food prices. Food speculation can be both positive and negative for food producers and buyers. It is betting on [food price](/source/food_price)s in [financial market](/source/financial_market)s. Food [speculation](/source/speculation) by global players like [bank](/source/bank)s, [hedge fund](/source/hedge_fund)s or [pension fund](/source/pension_fund)s is alleged to cause price swings in [staple food](/source/staple_food)s such as [wheat](/source/wheat), [maize](/source/maize) and [soy](/source/soy) – even though too large price swings in an idealized economy are theoretically ruled out: [Adam Smith](/source/Adam_Smith) in 1776 reasoned that the only way to make money from commodities trading is by buying low and selling high, which has the effect of smoothing out price swings and mitigating shortages.{{cite journal|url=https://www.cairn.info/revue-economie-internationale-2011-2-page-51.htm#|title=Index trading and agricultural commodity prices: A panel Granger causality analysis|author=Gunther Capelle-Blancard,Dramane Coulibaly|journal=Économie Internationale|year=2011|volume=2-3|issue=126|pages=51–72}}{{Cite book|title=An Inquiry into the Nature and Causes of the Wealth of Nations|first=Adam|last=Smith|publisher=University of Chicago Press|orig-year=1776|year=1977|isbn=0-226-76374-9}} For the actors, the apparently random swings are predictable, which means potential huge [profits](/source/profit_(accounting)). For the global poor, food speculation and resulting price peaks may result in increased [poverty](/source/poverty) or even [famine](/source/famine).{{cite web | title=Food speculation | website=[Global Justice Now](/source/Global_Justice_Now) | date=2014-12-09 | url=https://www.globaljustice.org.uk/food-speculation | ref={{sfnref | Global Justice Now | 2014}} | access-date=2019-08-21}} In contrast to food [hoarding](/source/hoarding_(economics)), speculation does not mean that real food shortages or [scarcity](/source/scarcity) need to be evoked, the price changes are only due to [trading](/source/trading) activity.{{cite web | last=Vidal | first=John | title=Food speculation: aFood speculation: 'People die from hunger while banks make a killing on food' | website=the Guardian | date=2011-01-23 | url=http://www.theguardian.com/global-development/2011/jan/23/food-speculation-banks-hunger-poverty | access-date=2019-08-21}} Food speculation may be a reason for [agflation](/source/agflation).{{cite web |last1=Islam |first1=M. Shahidul |title=Of Agflation and Agriculture: Time to Fix the Structural Problems |url=https://www.files.ethz.ch/isn/55904/31.pdf |publisher=[National University of Singapore](/source/National_University_of_Singapore) |access-date=23 June 2021}} The [2007–08 world food price crisis](/source/2007%E2%80%9308_world_food_price_crisis) is thought to have been be partially caused by such speculation.{{cite thesis|title=Food Commodity Speculation, Hunger, and the Global Food Crisis: Whither Regulation|institution=[London School of Economics and Political Science](/source/London_School_of_Economics_and_Political_Science)|year=2015|author=Anna Chadwick|s2cid=155654460}}{{cite journal | last=GHOSH | first=JAYATI | authorlink=Jayati Ghosh|title=The Unnatural Coupling: Food and Global Finance | journal=Journal of Agrarian Change | publisher=Wiley | volume=10 | issue=1 | year=2010 | issn=1471-0358 | doi=10.1111/j.1471-0366.2009.00249.x | pages=72–86| bibcode=2010JAgrC..10...72G }} == History == Institutions such as [hedge funds](/source/Hedge_fund), [pension funds](/source/Pension_fund) and [investment banks](/source/Investment_bank) have been accused of pushing up prices, with investment in food [commodities](/source/Commodity) rising from $65bn to $126bn (£41bn to £79bn) between 2007 and 2012, contributing to 30-year highs.{{cite news|title=The real hunger games: How banks gamble on food prices – and the poor lose out|newspaper=The Independent|url=https://www.independent.co.uk/news/world/politics/the-real-hunger-games-how-banks-gamble-on-food-prices--and-the-poor-lose-out-7606263.html|url-status=live|access-date=April 1, 2012|archive-url=https://web.archive.org/web/20120403171521/http://www.independent.co.uk/news/world/politics/the-real-hunger-games-how-banks-gamble-on-food-prices--and-the-poor-lose-out-7606263.html|archive-date=April 3, 2012}} This has caused price fluctuations which are not strongly related to the actual supply of food, according to the United Nations. By 2010, financial institutions made up 61% of all investment in [wheat](/source/wheat) futures. According to [Olivier De Schutter](/source/Olivier_De_Schutter), the UN special rapporteur on food, there was a rush by institutions to enter the food market following [George W. Bush](/source/George_W._Bush)'s [Commodities Futures Modernization Act](/source/Commodities_Futures_Modernization_Act) of 2000. De Schutter told the Independent in March 2012: "What we are seeing now is that these financial markets have developed massively with the arrival of these new financial investors, who are purely interested in the short-term monetary gain and are not really interested in the physical thing – they never actually buy the ton of wheat or [maize](/source/maize); they only buy a promise to buy or to sell. The result of this financialization of the commodities market is that the prices of the products respond increasingly to a purely speculative logic. This explains why in very short periods of time we see prices spiking or [bubbles](/source/Financial_bubble) exploding because prices are less and less determined by the real match between supply and demand." In 2011, 450 economists from around the world called on the [G20](/source/G20) to regulate the commodities market more. Some experts have said that speculation has merely aggravated other factors, such as [climate change](/source/climate_change), competition with [bio-fuels](/source/bio-fuels) and overall rising demand. However, some such as [Jayati Ghosh](/source/Jayati_Ghosh), professor of economics at [Jawaharlal Nehru University](/source/Jawaharlal_Nehru_University%2C_Delhi) in [New Delhi](/source/New_Delhi), have pointed out that prices have increased irrespective of supply and demand issues: Ghosh points to world wheat prices, which doubled in the period from June to December 2010, despite there being no fall in global supply. == See also == * [Agflation](/source/Agflation) * [Food sovereignty](/source/Food_sovereignty) * [Geography of food](/source/Geography_of_food) * [Right to food](/source/Right_to_food) ==References== {{reflist}} ==External links== *{{cite web|publisher=fao|url=http://www.fao.org/3/i2107e/i2107e13.pdf|year=2011|title=Safeguarding Food Security In Volatile Global Markets|editor=Adam Prakash}} Category:Food politics Category:Financial markets Category:Commodity booms {{food-stub}} --- Adapted from the Wikipedia article [Food speculation](https://en.wikipedia.org/wiki/Food_speculation) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Food_speculation?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.