Fertilizer markets and their interplay with commodity and food prices
Food Commodity Markets
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Transcript of Food Commodity Markets
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FOOD COMMODITY MARKETS
Pam Grey, Connie KwanCapital Markets, May 20, 2011
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AGENDA
Brief History and Set-up Why are Markets not serving all
Stakeholders? Recommendations and Action
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FOOD COMMODITY MARKETS
Spot
Forward
Futures
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WHAT IS CONSIDERED A COMMODITY
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FOOD STAKEHOLDERS
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SETTING THE STAGE
Food is a basic human right.
Sustainable food commodity markets efficiently and effectively distribute global food supply and
serve all stakeholders.
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WHY ARE MARKETS NOT SERVING ALL STAKEHOLDERS?
Product Uniformity Speculation
Hoarding Biofuels
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Food Commodity Markets adversely select for mono-culture crops, threatening biodiversity and ecosystem resilience.
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EVALUATION OF CROPPING IN BHORAJ, INDIA
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Speculative trading creates the illusion of scarcity
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SPECULATION: GOOD OR EVIL?
SPECULATION IS GOOD SPECULATION IS EVIL
Provides liquidity Physical goods follow real
demand/supply pattern at final sale
Speculation in all markets within historical norms
Supporters: Sanders & Irwin - Canadian
Journal of Agricultural Economics
Pirrong - WSJ
Drives up prices to end consumer
Futures prices failed to converge with cash prices (CME, 2009)
Disrupts farmers’ and grain merchants’ confidence in futures market
Supporters: Childs & Kiawu – USDA Robles, Torero & von Braun – Intl
Food Policy Research Institute Levin – US Senate Sub-committee
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HOARDING
Commodity Traders
Control the Market
Onion Futures Act
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Hoarding: Limiting or banning exports can significantly affect
market prices
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Biofuels divert valuable food stocks to fuel
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BIOFUEL
Increased Demand
70% of the Increase
10.76 Billion Gallons
Tax Incentive
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RECOMMENDATIONS
Market Changes Raising Margins Eliminating Long Contracts Increase Spot Markets Increase Grain Reserve
Actions Letter to Commodity Futures Trading
Commission (CFTC) Robin Hood Tax Social Programs
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MARKET CHANGES
Market Changes Raising Margins Eliminating Long
Contracts Strengthening Spot
Markets
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LETTER TO CFTC
Limit speculative activity Membership requirement for
participating
Help Senator Carl Levin support section 737 of the Dodd-Frank
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ROBIN HOOD TAX
Combination Financial Transaction Tax (FTT), bank levy and The Financial Activities Tax (FAT) 0.05% from international
bankers’ transactions 0.01% from currency
transactions Raises £20 billion
annually in the UK alone
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SOCIAL PROGRAMS
Group Food Fund Governments, Non-profits, Grad students! Balanced Portfolio to hedge against food
prices Insurance
Scaled deployment
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Food is a basic human right.
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REFERENCES