New Delhi: Excessive speculation in futures and commodities markets is leading to high volatility in food prices, which has a "tremendous human impact", United Nation's body Food and Agriculture Organisation (FAO) has said.
"Let's make one thing clear, we are not talking about speculation related to price discovery and the normal functioning of the futures markets. We are talking about excessive speculation in derivative markets, which can increase price swings and their speed," FAO Director General Jose Graziano Da Silva said in a statement.
Speaking at a high-level debate on role of financial speculation in food price volatility last week, Da Silva said that the world needs to take a hard look at speculation on the financial markets and its potential impact on food price volatility.
"Excessive food price volatility, especially at the speed at which they have been occurring since 2007, has negative impacts on poor consumers and poor producers alike all over the world," he added.
Keynote speaker at the debate, President of the Dominican Republic Leonel Fernandez Reyna stressed on the need for more information to get a clearer picture on market transactions, in order to better understand the role of speculation in agricultural commodities.
Fernnndez said that the food price swings were having a "tremendous human impact" and cautioned against using food commodities purely as financial instruments.
"Financial speculation is exacerbating market fluctuations and this exacerbation is generating uncertainty - this uncontrolled, unregulated exacerbation is provoking a dramatic impact on countries that are net food importers," he added.
FAO has pointed out that the period between 2008 and 2011 was characterised by a series of extreme highs and lows in food pricing, which made it difficult for economically vulnerable consumers and agricultural producers to cope.
"Food price inflation has already been higher than overall inflation in almost every country. This has a greater impact on the poorer population, who can spend up to 75 percent of their income in food," Da Silva said.
The view that speculation contributed to recent price volatility has led to more awareness among governments on the need for the introduction of greater regulation to limit this activity. However, the question of how much and what form of regulation is a matter of debate, he added.
First Published: Sunday, July 8, 2012, 11:18