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Union Calls for Curbs on Speculation

NFU Scotland is backing calls to curb the damage that financial speculation is wreaking on agricultural commodities markets.  Communities both in the developed and the developing world are feeling the impact.

Financial tools, such as the Futures markets, were intended to assist industry in managing volatility but, as the importance of food production grows world-wide, these markets have attracted the unwanted attention of financial speculators.  That has been to the detriment of producers both at home and abroad.

As an example of growing speculation in this area, the volumes traded on the Chicago wheat Futures markets are now some forty-six times the actual amount of wheat that the world produces in a year.

To counteract the impact that speculation is having, NFU Scotland is supporting efforts to introduce greater regulation to the sector aimed at stamping out abuse and manipulation.

Speaking at the 2011 Highland Show, being held at Ingliston near Edinburgh, NFU Scotland President Nigel Miller said:

“Agricultural commodities – such as wheat – are inherently unstable and financial tools that allow those in the food supply chain to hedge their risk and plan forward are an increasingly important element in managing the market.  However, it is deeply alarming that the greatest proportion of activity in the futures markets no longer involves those in the supply chain but is, instead, taken up by speculators.

“The way the Futures market operates should be about the industry having the ability to manage itself.  Instead, it is a system open to third parties who often have little interest in managing the long term risks associated with producing food but have every interest in short-term financial gain.

“The unwelcome entry of significant financial resources into the Futures markets has brought increase volatility to markets and contributed to price spikes.  To combat this, there is a need for greater structure to be given to the Futures markets so that they do the job intended which was to allow those in the food supply chain to hedge their risk and plan forward.

“We must learn lessons from the last few years which have highlighted the dangers of not regulating carefully enough the activities of individuals and institutions in the financial markets.  Food commodities are too important to be played about with by day traders and speculators.

“We will join others in working towards improved regulation for commodity financial markets. There is no harmonised regulation for these and, astonishingly, they lack a basic set of rules governing market abuses and price manipulations in some cases. We also welcome the efforts that are underway to define a common set of rules for both commodity and financial markets.

“At the same time, we have an opportunity to make sure that more transparent market information is made available to all to allow all parts of the food supply chain to better plan and manage their production.”  

Ends

Contact Bob Carruth on 0131 472 4006

Date Published:

News Article No.: 113/11


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