FOOD COMMODITY MARKETS Pam Grey, Connie Kwan Capital Markets, May 20, 2011
May 27, 2015
FOOD COMMODITY MARKETS
Pam Grey, Connie KwanCapital Markets, May 20, 2011
AGENDA
Brief History and Set-up Why are Markets not serving all
Stakeholders? Recommendations and Action
FOOD COMMODITY MARKETS
Spot
Forward
Futures
WHAT IS CONSIDERED A COMMODITY
FOOD STAKEHOLDERS
SETTING THE STAGE
Food is a basic human right.
Sustainable food commodity markets efficiently and effectively distribute global food supply and
serve all stakeholders.
WHY ARE MARKETS NOT SERVING ALL STAKEHOLDERS?
Product Uniformity Speculation
Hoarding Biofuels
Food Commodity Markets adversely select for mono-culture crops, threatening biodiversity and ecosystem resilience.
EVALUATION OF CROPPING IN BHORAJ, INDIA
Speculative trading creates the illusion of scarcity
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
HOARDING
Commodity Traders
Control the Market
Onion Futures Act
Hoarding: Limiting or banning exports can significantly affect
market prices
Biofuels divert valuable food stocks to fuel
BIOFUEL
Increased Demand
70% of the Increase
10.76 Billion Gallons
Tax Incentive
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
MARKET CHANGES
Market Changes Raising Margins Eliminating Long
Contracts Strengthening Spot
Markets
LETTER TO CFTC
Limit speculative activity Membership requirement for
participating
Help Senator Carl Levin support section 737 of the Dodd-Frank
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
SOCIAL PROGRAMS
Group Food Fund Governments, Non-profits, Grad students! Balanced Portfolio to hedge against food
prices Insurance
Scaled deployment
Food is a basic human right.
REFERENCES