Lindsay Newland Bowker


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Commodities Speculation: A Cause of Food Crises? A Crime Against Humanity?

An important and credible new study, discussed at length in a recent Scientific American Article, seems to have penetrated all the hype and confusion about derivatives and about the causes of the food crises world wide that have caused famine, death, and revolt.:

The study concludes that ethanal has indeed been a major factor but also that the role of commodities market speculation is undeniable.

American and EU central banks and the biggest EU and American Banks are firmly commited to derivatives and resolutely opposed to any regulation, to any clearing houses or any changes that would fundamentally alter the current global free market in derivatives. Derivatives are an essential tool in global risk management, but if this studyis true are we allowing a systemic crime against humanity in not making least those corrections that would remove price distortions.?

Recently 10 ordinary game geeks with no background in scince and medicine solved a very complex problem in the study of HIV. . Can we do that here a TED conversations with this very important question?
Can we go beyond opinion, go beyond what we each already possess in expertise and knowldedge and become together here a global citizens collaborative seeking to understand and offer meaningful solutions to this truly critical global problem?

Can we become a collaborative of investigative journalists seeking the truth and bringing it here via links with commentary?

I think we can and I am proposing that we try. A monumental undertaking for anyone person but I believe the answer is out there in work that has alreday been done and published on the web. I think we as global citizens without a clue about global markets and murky mysteries of derivatives can penetrate this truly critical question. Can offer solutions the experts haven't come up with . I think its a great way to support Occupy Wall Street and use TED.

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    Oct 2 2011: Food politics (what you Lindsay, rightly coined as systematic crime) just changed it face. It was, still it is there.

    Heard about demand of bio-fuel putting pressure on food price in 2007-08 , now it's validated with a paper !!!, thanks for sharing.

    Many will start saying it's "conspiracy theory" , doesn't matter whatever we call it, human being will starve, kids will starve to death in some part of the world , which is not so important to this world !!! Important is we need to meet our energy challenge.

    Hunger is one side of the coin, other is threat to democracy. In countries where democracy is in infancy, government in power even if they are doing everything right , they will be at risk of being overthrown. Mass don't understand what is in it with food price vs Bio Fuel or speclations of some powerful street....... they just understand it's failure of the government that just they elected through vote...... what powertful tool power centers all the time having to control the governments of poor countries (some says there is no poor or 3rd world country though !!!)

    In the era of "speculative economics" share price goes up or down with speculator's speculation. Does not matter what the balance sheet of a company says, doesn't matter what the past performance of the company says, how hard employees working does't matter they will lose job as speculators speculated something so company need to cut cost !!!..................

    We are in unique time really...... need to do something.......
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      Oct 2 2011: I really first became aware of the corn to ethanol problem during my MBA. No one really doubted the simple fact that when you turn corn into biofuel you take it out of the mouths of the hungry and drive up the prices. I was horrified that we can so simply accept that more profit over here in the biofuel industry justifies the hunger and rising food prices elsewhere.
      How often in my classes did someone slough off my concerns with phrases like "this is just good business."

      It is not good business to let human beings starve. On a recent TED conversation a frequent commenter justified hoarding of food stuffs as 'just business' and replied that any interference with the unrestrained market is immoral. IMMORAL?

      Here is an infographic from the UN which helps to put the world food crisis into perspective.
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        Oct 2 2011: As usual Debra you came up with your wisdom and compassion.
        That's a very good link to get a snapshot, how buying power pushes people to hunger , not uanavialbility of food.
        In those countries where people need to spend more than 30-40% of income for food , a portion of population starves even after spending 100% of their's my observation of my own country.....
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          Oct 6 2011: @ Ted Barnes No I'm not saying Capitalists are exempt"

          Yes I was pretty sure that's where you were and I see you are well versed in banking history so especially glad to have you with us here exploreing this issue of the relationship between speculation as allowed by de regulation on the banking side and on the OTC side, and food prices.

          Greenspan admitted before congress right afer the need for a massive wall street bail out was announced in 2008 that he was wrong..Tht is decades of assurances that markets wold regulate themselves was wrong. And yet nothing meangful has been done to put menaningful checks and oversight back in place. All is exactly as it was from a ;egal and regulatory point of view the day the housing bubble burst. Now evryone is pretty much admitting we have a 1.4 quadrillion derivavtives bubble looming that is vulnerable to systemic failure and could cause a complete market collapse.

          The issue of the causal relationship between high food prices and speculation has not received any serious consideation from the Fed here or EU central banks. They seem to be absolutely certain that speculation has caused no distortion at all of market fundamentals.

          Have you seen any studies or data that do a better job thatn the Caimbridge study of examining the role of seculation in food prices?

          What is your sense of the data and studies that have been brought to this conversation? Is there still an open question in your mind about the role of speculation in food prices?
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          Oct 6 2011: @ Lindsay - Absolutely no question. There were always speculations, even welcomed ones, but what we see now is an absolute travesty. Alot of the conversations here have touched on the right subject about the deregulation of commodities in general and the impact that has had. Turning food into yet another "derivatives" market is heartless and immoral.

          "They seem to be absolutely certain that speculation has caused no distortion at all of market fundamentals." Yeah, that's what they say publicly. If you see some private interviews you'll see the proverbial bomb is ticking. It is going to explode just like all the other markets did.

          "We first became aware of this [food speculation] in 2006. It didn't seem like a big factor then. But in 2007/8 it really spiked up," said Mike Masters, fund manager at Masters Capital Management, who testified to the US Senate in 2008 that speculation was driving up global food prices. "When you looked at the flows there was strong evidence. I know a lot of traders and they confirmed what was happening. Most of the business is now speculation – I would say 70-80%." -

          It goes on to say that Masters believes it will end as bad as Wall Street did and it will blow up.

          It's been proven how detrimental to society deregulation is, and I believe that the people responsible for these massive global ponzi schemes and frauds should be prosecuted and perp-walked straight to prison. Just like the housing bubble, they knew this was the outcome of 80 percent of the food market being speculation. They knew people all over the world would begin to starve. They knew the biofuel market morally should have been kept in check. They didn't stop any of it because like everything else in this horrible situation, it gained them LOTS of profit. The food industry is the largest industry in the world. So like my original statement, if you can corner the market and co
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          Oct 18 2011: @Ted Barnes Oct 6...there were always speculations.


          I am just seeing your comment for the first time and know from your email of the same date that you are away for several months. Thank you for taking the time to make this comment befo e your departure.

          I agree..everyone knows that speculation in food inflates already rising prices even more overwhelming and distorting food markets globally. Almost everyone who matters ( except Ben Bernanake and his fellow EU central bak leaders) have publicly acknowledged it..even the regulatory authroity for commodities markets has acknowledged it.

          Everyone sees the gorilla in the room. No one dares to try and escort him out.
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        Oct 2 2011: I;ll give you a thubs up on this next week..I am out for this week they say..

        These graphs were fascinating.

        The first one which tracks what the Caimbridge study and model address
        themselves to and interestingly includes the Lehman brothers collapse as one of the "events"..a sharp drop after that and then the phenomenal rise with the number of peopl ein hunger reaching $1 billion for the first time ever ( what % of the world population is that..almost 18%????)

        The second one which shows that in poor nations food takes as much as 50% of earnings. In egypot just before the Tahir square uprising food prices had reached as much as 70% of income ( as I recall) and was a major factor triggering the uprising. This is also addressed in Caimbridge study ..not in the methematical model but in their analysis and interpretation.

        Really wonderful graphs..thanks again Debra for bringing them here. to this thread where we are gathering the facts and stats on hunger and the effect recent food price praks have had in the poorest countries.
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          Oct 5 2011: Hi Lindsay!

          No no, I'm not saying capitalists are exempt from the consequences of their actions....I'm saying that they mostly don't care about the consequences of their actions. What I meant by their own set of morals is really, corporations don't fit morals into their calculations. For them, it's all about the bottom line and revenue increases every quarter. You have to understand, corporations don't give a rat's ass about world hunger or poverty or immoral treatment of animals or putting toxic chemicals in food. They care about the bottom line and cornering the market. From a business standpoint, food is a valuable commodity to them. If they can control the market, they can control the supply and demand. That's how it works. Try not to twist my words. I'm not defending these giant food corporations that will literally murder for profit. I'm just putting into perspective how rotten and evil they are.
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        Oct 5 2011: Debbie Downer! Just kidding, those graphs were startling! I agree with you that starvation is not good business, but you have to realize capitalists and people who believe in complete free-market and unrestrained corporations follow a different set of morals.
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          Oct 5 2011: Hello Ted,

          Not clear on your position, here Ted..are you suggesting that captilaists are somehow exmept from the consequences of their actions? That it's just ordnary business, ordinary fact that 85% of the wolr'd food is consumed by 2% of the wolrd's people..that the price of food drove unprecedented numbers into povert worldwide? That its safe for the wolrd that so few cororations own and ontrol the wolrd's entire food supply?
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      Oct 2 2011: Hello Salim and thanks for helping to launch this TED Conversations experiment in search of common wisdom on the economics of the global food crisis. This new study is very exciting because it trasncends all the hype and rehetoric with the eloquemce and truth of mathemetics ( in another thread I will be inviting our TED mathmeticians to comment on and explain the model.

      It would be great if you would be willing to moderate this thread you have stareted. I am hoping many others in our community will bring links and commentary on some of the facts of the world food crisis focusing especially on changes since 2000.

      This study sought only to correletae speculation with food prices. It was addressing itself to the refusal of th e world's central banks and the wolrds biggest banks and their regulators to believe that speculation through the derivatives market has had any impact at all on food or oil prices.

      This conversation is narrowly focused on that aspect which is blocking any effort to effect changes in the commodities marjet to address these price impacts. But you and I have participated in many discussions together on the politcal aspects of hunger and famine. We know that any price correction we might achieve through reform of the commodities markets will not change politics of famine. I think a thread, this thread on the politics and realities of famine are essential background to this experiement. And of course also the question of how these politics impact price and availability of food.
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        Oct 2 2011: Hi Lindsay
        It's my pleasure to be part of your intiative.
        Obliged I am with the honour.....

        Here comes an old article (Oct, 1998) by Jefrrey Sach of Harvard, based on Amartya Sen's (Nobel Prize winner Economist) findings and observation on hunger & famine........ how politics & economics of rich pushes poor to die starving,9171,989405,00.html
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          Oct 2 2011: A good article Salim establishing that historically times of prosperity have brought rising food prices that push many poverty and hunger. Also interesting in its observation that in a democracy the response will usually be some sort of effrot to relieve the food crisis through aide ( beacuse politicians want to get re relected and because its part of the fabric of democracies) whereas no relief will be given in non democratic nations.

          Her's a good quote from it:


          "Sen demonstrated that the Bengal famine was caused by an urban economic boom that raised food prices, thereby causing millions of rural workers to starve to death when their wages did not keep up. And why didn't the government react by dispensing emergency food relief? Sen's answer was enlightening. Because colonial India was not a democracy, he said, the British rulers had little interest in listening to the poor, even in the midst of famine. This political observation gave rise to what might be called Sen's Law: shortfalls in food supply do not cause widespread deaths in a democracy because vote-seeking politicians will undertake relief efforts; but even modest food shortfalls can create deadly famines in authoritarian societies"

          For our work here this article raises two questions.:

          (1).did the model take adequate account of the pre-Regan commodities reform ( mid 70's..I think)..of these old patterns between prosperity and high food prices

          (2) would the correction in food price distortion from speculation produce benefits that actually reach the parts of the wolrd where hunger and famine are most pressing?
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          Oct 5 2011: oo nice one salim!
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          Oct 6 2011: You know, I woke up this morning and I realized that Charles Dickens had pinpointed this problem of food speculation in A Christmas Carole back in 1843. What was Scrooge doing in many scenes? Driving up the price of corn just before his famous lines "are there no work houses...........well then they had better die then and decrease the surplus population".
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          Oct 6 2011: @ Debra on Scrooge

          ..literary lectio divina in reverse.?

          ...and too true.. an old story

          The issue with derivatives is that a lare part of that 1.4 quadrillion in notional value at the moment is in fact pure speculation ad not the facilitation of investment that Bernanke and industry insider claim. In effect central banks all over the world are being used to finance pure speculation that does not promote or serve investment,To me, that is a key public policy question all by itself..are we using central bank loans to finance pure speculation? Are we allowing markets created to support and further and lend stability to investment and growth to finance innovation to actually be subverted in a way that interferes with the original purpose of creating and regulating these markets.I don't have a sense yet of how much of the derivatives market is just pure profit seeking predatory exploitation of the economy and of our markets and how much is what Ben Bernanke says it is..what many insiders say it is.a vehincle for liquidity, stablity etc. etc that allows the fueling of our economy at much higher leverage ratios ( that's the whole thing with derivatives..more mprofit with more leverage)I just readd somewhere ( a reliable source) that the Fed itself as other central banks is leveraged 50 to all time high. It was over leveraging that brought down the markets in 2008..the reserves just weren't there to cover all the contracts presented for settlement..that's what our tarp money paid for..we essentially covered the gambling losses..The food issue and the energy issue as well are especially
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      Oct 4 2011: Salim,

      Wanted to bring to this thread on stats and research on causes of the food crisis this very interesting 2008 study by the USDA which gives some insight into global supply and demand for the past two decades. Overall it suggests that market fundamentals have driven food prices high.

      From 2000 to 2008, according to this study "global consumption of aggregate grains and oilseeds exceeded production in 7 of the 8 years since 2000”

      From what I see of documentation provided on the Caimbridge model announced as proving that speculation caused the food crisis, the model did not control for or take account of supply/demand gaps or other aspects of market fundamentals.

      The USDA study provided more backgrond to Bernankes comment in February at the Washington Press Club about changes in eating habits in China and Brazil being a factor. The study says that prosperity in the 90's co-ocurred with higher consumotion of meat which, because of grain feeds added further pressure to a tight global food market. (Every pound of beef takes two or more pounds of grain to produce).The study also mentioned several other factors, not accounted for in the Caimbridge model that set up a sort of "perfect storm" for the food crisis

      .(1) reliance on storage had diminished considerably as concerns globally about food security when the short fall between supply and demand ocurred global reserves were low

      .(2) production response was frustrated by weather in the case of Russia ( a major grains exporter) and higher production costs as the costs of fertilizer, weed killers and insecticides were influenced by rising oil prices.

      (3) countries with high demand and huge foreign exchange reserves decided to build food reserves

      ( discussion onUSDA food study continued below link to study below)
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      Oct 4 2011: USDA Study cont.

      The USDA study brought out the role of the falling dollar in escalating food prices and higher demand. The falling dolar in relation to many other key currencies made it possible forimportaing natins with stringer currencies toi , a sthe study said, consume more no matter what the price ( on wolrd markets trades are settled in dollars That must also mean that the $ shown as price rises aren't adjusted in any way to reflect the lower value of the dollar..

      Overall the USDA study supports and explains the resistence on the part of the FED and other Central banks to consider speculation as a major factor in the food crisei post housing bubble. The Caimbridge model dorsn't seem to account adeqautely for these strong underlying market fundamentals of yields, production costs, consumption, changes in consumption, the falling dollar and low food reserves and may not therefore make the case for speculation as a cause.

      Since this USDA study was pre-housing bubble collapse, preceding the huge drift of post 2008 speculation into commodities it is not a direct refutation of the role of speculation to heich the Caimbridge and other studies have pointed.

      Perhaps more a fuel on the fire scenario? That speculain drove food prives alreday moving up from market fundamentals even higher?

      Reading this study took me back to Bernanake's February 2011 comments at the Washington Press Club about the role and purpose of Central Banks. In reminding questioners there that Central banks are concerned aboutthe helath of their own countries economy not the health of global economy or the impact of global phenomenon on specific countries. In otherwords, central banks don't create policies to end wolrd hunger, they create policies to keep their own currency strong, their own country strong. That intervention for relief and better sceurity against food crises should come from the UN and NGO.s?
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    Oct 12 2011: Minutes after making my post calling for data on the proportion of speculative trading in food in global markets
    ( I found this stunning article by Timothy Wise at his blog offering jaw dropping stats on the proportion of pure speculation in food commodity markets and who controls that market:

    "Some $9 trillion in trades take place in commodity derivatives, with 80-90% in over the counter (OTC) trading, outside of public scrutiny. Five banks control 96% of derivatives activity, giving a few players decisive market power. The ratio of non-commercial speculators to commercial hedgers (those with a commercial interest in the traded commodity) is by some estimates 4:1, roughly a reverse of the shares ten years ago when speculators accounted for 20% of the activity. Then, such speculators indeed provided liquidity to the markets without overwhelming them. That is no longer the case. "

    If Tim's article is correct, and I think all would agree his reporting on this and other issues of interest to us at TED, is expert and responsible, it is impossible to understand why the UN FAO wouldn't immediately call not just for classifications but a halt to all purely speculative trading in foods.

    .Why is that?

    What is the reluctance?

    In another article that I will bring the link on another expert and responsible analyst suggests that its almost impossible to take control back. He said that key insiders just laughed at the idea that any attempt to limit positions or elminate speculation..that it would just displace the same volume of speculation to undetectable under the table trades. That there is just so much money in food speculation that no one, especially the five banks reponsible for 95% of global food speculation will simply give it up no matter what regulators say or do.. They will simply find another way to to do it

    .Could this be true?
    • Oct 13 2011: Not sure what $9 trillion represents, but it does not seem meaningful here. It's even much too big to be a figure for gross notional of all commodity derivatives (including energy, metals, and with huge duplication). Maybe it's cumulative activity (flow/volume/turnover not position) for all commodities measured over some period of time. (Notional and gross exposures for OTC from BIS here:

      To focus on, eg, corn, you can look at futures market data called COT = commitment of traders reports from CFTC.

      Going by the percentages in the link after searching "corn", pure unambiguous producers/users had positions 21.2% and 36.5% of open interest for longs and shorts. This undercounts because a good chunk of the non-reportable traders are probably small farmers and users and these hold 9.6% and 14.8% of long/shorts. Moreover, a large portion (40.1%) of positions are spread positions, where holders are neither long nor short overall. Equivalently, if you add up all longs and shorts you only get 59.9%, not 100%; so dividing by 0.599 adjusts percentages above to represent a portion of just the non-spread OI. You get 35.4%, 60.9%; 16.0%, and 24.7%.

      People make different things out of all these numbers. To make the market appear dominated by speculators you could just report only 21.2% and 36.5% of OI are traditional hedgers (so 28.85% overall). To make speculation look small you could go as far as saying that perhaps 60.9 + 24.7 = 85.6% of shorts are farmers hedging. The same approach for longs gets 51.4% -- there is a clear natural imbalance.

      Also in the data, the dealers you were concerned about have 13.7%, 3.6%, 6.7% of OI in long/short/spreads.

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        Oct 13 2011: Hi Marshall,

        Wow!! You are way past me in this very technical reply..can you dumb it down a bit?

        Tim's article isn't only about food. It's about commodities markets in general. The bottom line he is presenting there..that speculative (iei non commerccial..not supporting the actual process of bringing a commodity to market) trades out number commercial trades by 4 to 1. This shows up accross all markets, financial too.

        Perhaps you could expain to all of us, the "all long issue" in food commodities. I see that referred to all the time and I see many pointing to that as a problem. I get the general idea that the speculative derivatives at issue in food markets, any commodity when its market fundamentals indicating scarcity and a trend upward in prices taking only only long positions on the upward price itself often through predatory algorithms that just stalk the markets looking for what is rising. They are not interested in food per se..they are studying food per se. They are just making buys, creating contracts acoss a range of markets searching for combinations that produce the highest yields. like aflock of migratry birds they move in and out markets , financial to commodities, commodities to financial just sseravhing to maximimize profit.

        Also in contrast to the normal and intneded functioning of commodities markets I read somewhere that this whole derivatives market is drives on feeds and trades that are possible because only 2% of derivatives contracts actually settle or are ever expected to settle..they are more like risk management than investment . So seven though the value of all outsanding contracts( their notional value) is hundreds of times larer than the underlying assets they are about money still gets made through trades and associated fees. It;s sort of like musical chairs..that only becomes an issue when the music stop and whoever is holding the contacts has to pay up.
    • Oct 13 2011: Please do look through the numbers to be comfortable with what they mean. Spread positions increased over an extended period of time, so producer/user positions as a portion of OI (eg, without grossing up by 1/0.599) have trended down.

      But it's not clear increased spread positions have an ill effect on market function or pricing, and I think all this demonstrates the alarms about rampant speculation are overdone.

      So the Wise piece to me is not a very solid summary of who makes up the ags markets. Besides all these issues with numbers, I think a bunch of things in there that sound scary are just wrong. Eg, I don't believe this: "Worse, the index funds are mandated to keep the value of their commodities in strict proportion, so that when the prices and value of energy products go up the funds have to buy more corn and soybean futures to maintain the mandated proportions."

      You might have noticed there is a big imbalance between the long and short positions of producers/users. They skew short by a lot. This is entirely natural, because a farmer's entire revenue comes from crop sales and they are very motivated to hedge it to pay for equipment, fertilizer, farmhands, etc. In contrast, ag prices are only a small portion of a baker's costs and they have flexibility to increase product price to compensate.

      Entirely as a consequence of this market structure, the non-traditional hedgers/speculators must skew long. It's been that way since the earliest days of ag markets and it's not some design to create bubbles.
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    Oct 12 2011: Hi Lindsay --

    Another very important dialogue, here.

    Want to connect you to a new conversation regards 300,000 people marching from NYC to DC to protest genetically modified foods (GMOs). Monsanto is involved in 90% of GMOs. No doubt their effect has impact on trade speculation.

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      Oct 12 2011: Hi Andrea..another one of my pet issues and very significant in the whole unraveling of 3 decades of pure rape of poorer countries to get them out from under onerous terms and conditions of food aid and able to move toward food security and investment in their own sustanable agriculture.

      My next big project here at tED though will be on the tar snads/keystone pipeline scnadal as that is immediate and seems to be getting lost. It will be a reality if we don;t shine a big light on it.
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    Oct 9 2011: There is sufficiency in the world for man's need, but not for man's greed.

    Mohandas K. Ghandi
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      Oct 9 2011: so true, Debra,..that was Buckie's ( Buckminster Fuller's) premise in the "World Games"..that all essential resources on the planet could take care of us all if we managed access and distribution in service to humanity and not greed.

      At the moment..for the forseeable is a global scarce resource..we are consuming globally more than we are producing on an annual basis...but demand , who has access, who can afford food at any prices has nothing to do with need. Even if bio-fuels drop completely out of the picture globally in competing for food grains the basic picture won't change..the spread between basic need, real need and consumpton will just grow.

      We, the developed nations of the world, the power centers, set all that up..Clinton admitted at a UN speech in 2009 that he and all the other western leaders made a huge mistake in adopting the strategy we did for poor nations instead of focusing our global collaborative efforts on food self sufficiency in the world's poorest nations.

      That the poorest nations , the hungriest nations, have been moved further and further from food self sufficiency through UN, IMF and Wolrd Bank "anti poverty initiatives" over the past three decades is exactly what makes them now the most vulnerable to dramatic rises in food prices and to the huge inflation of those prices atttributable to speculation.

      All the signs ( according to market insiders involved in food commodites) points to more of the same and even more speculation in food prices which will hit first and hardest in the world's poorset nations who are not food self sufficient because of global policy and cause countless millions more to fall into famine.

      I am thinking we need a UN declaration of emergency to immediately remove all food and food production products from speculation and to encourage cash based food aid to the world hungriest nations.proportionate to each nations over consumption.
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        Oct 9 2011: Lindsay, this last paragraph is the clearest thinking most hopeful thing I have read in weeks. How do we agitate for it? I will write a letter to my Prime Minister. Is this the best route?
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          Oct 9 2011: Debra,

          I think my summary is correct..that it is exactly our policies via the UN, IMF and Wolrd Bank that has left the worlds poorest and hungriest nations completely unable to muster any defense against the continuing trend to higher food costs and the huge inflation of that trend via speculation

          .I also think it is actually a global humanitarian criss and that it is not been viewed or recognized that way and that a UN declaration of global humanitarian emergency is appropriate.

          From what I have read in the immersion this conversatin has required..although everyone recognizes the truth of the role of speculation in further inflating prices that were rising for other reasons, there is nothing afoot to take any immediate action and there are so many different exchanges causing this, including Canada's own where about 10% of the indexes on commodities exchanges are purely speculative.

          A UN declaration of humanitarian emergency might have some effect in expediting changes everyone already knows are essential to global food security. We have acknolweged from the outset here that taking speculation out of food prices globally would not cure wolrd hunger. But I think we have to act globally and immediately to take responsbility for the fact that we, the developed nationsof the world are largely responsible for the fact that the world's hungriest nations don't have food self sufficiency. We caused the vulnerability they have to food price trends. Millions more are about to be driven into hunger by a continuation of speculation and a continuation of food price increases. That seems absolutely clear. Absolutely certain.

          I think we do have to take collective immediate action through cash aide for food relief not through governments but through reputable food relief NGO's .
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          Oct 9 2011: I think the emergency declaration should also address debt forgiveness and exemption from the onerous terms and conditions the IMF/Wolrd bank imposed on these nations (eg agreeing not to invest in their own infrastructure, agreeing to use ( ie buy) genetically modified seed or foreign fertilisers and insecticides..imposing technology that added to debt and caused great harm , rrquired privatization of water and other resources).

          Vineet, Salim and I have been collaboratively exploring this and our posts below include many links.I have many questions about the UN program of debt relief and many questions about whether countries like Bangladesh who have been deemed ineligible because their debt is not large enough in relation to its economy.will get relief from any onerous terms and conditions.I think a UN emergency declaration must provide immeduate 100% relief from these outrageous loan conditions and provide an immediate relief down to an acceptable level for each nation with no additional requirements except a commitment of all resoures to food self sufficiency.

          What we did was rape..this is restitution.

          The UN FAO barely mentioned speculation at the 2009 Summit on Food Security in Rome and at that time did not see a continuing trend in riisng food prices. They were emphasing each nations responsibility for its own food security. Months later in February 2011 they joined France in its call to remove speculation from food commodities:

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        Oct 10 2011: Lindsay maybe we need to see what really mean "developed" because if is just related to money is out of humanism. Surely the poor nations are blessed with the underdevelopment. Then we have to see what really is poverty.
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          Oct 11 2011: As always you get right to the universal heart of the heart of what in me felt it important to make whatever contribution I could to this important global issue.

          Can we expect Corporations to consider unintended and unknown social and economic impacts of their search for profit?

          Aren’t their actions in that regard only circumscribed by law or by public ( or perhaps legal) encounter that brings to light the unintended consequences of their actions.?

          The “social responsibility” part of any large corporation usually is driven only by what has been brought to their attention by law or highly visible public isn’t built in voluntarily.

          If we allow ourselves to get distracted by the polarities and dichotomies of “ developed vs. undeveloped”, or “good vs evil “or labels for corporate actions like “greed” then we are ensnared in judgment ( and therefore ego) and not making our best contribution to truth to justice to shining a light on what is happening.

          That is my purpose here in this shine a light on a truth that regulatory authorities and the U.N. FAO have been reticent to admit or call for action on. To do what I can, what we can with this unique opportunity of TED conversations to heighten awareness, build pressure on the U.N. and FAO and regulators, to name names and shame those ta the center of this and hopefully to push towards solutions that come in time.
          Shining that light responsibly, accurately, unwaveringly is what matters.
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    Oct 3 2011: Today I ran across an article aboutU.S. Fed Chair Ben Bernankes comments on the idea that speculation caused high food prices.

    :"One questioner focused on the Fed's possible role in driving food prices and whether those rising prices have fueled social unrest in the Middle East Bernanke said that factors other than food prices may be playing a role in the protests in Egypt and elsewhere, and that global food prices are rising mainly because of trends in emerging markets. Those emerging economies, and the richer diets that go along with rising prosperity, are driving the rise in food prices, Bernanke said. He called it "entirely unfair" to blame the Fed's loose monetary policy, including the recent program of Fed bond purchases known as QE2."

    The remarks were made at a February 2011 meeting at the Washington Press Club

    Collecting and documenting what central banks in the US, EU and elsewhere, those of regulatory agencies have gone on record saying/writing about the effect of speculation on food prices is key so I am stratingthis thread to capture other links and commentary which memeber sof the TED community might offer here via link and analysis/comment.
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    Oct 3 2011: Basic information on derivatives for laymen:

    In plain terms, derivatives are THE cause of the Financial Crisis. They are behind EVERY failure/ default that has occurred. Almost no one is willing to address this issue or include it in the discussion of how to insure we don’t have a Second Round of the Crisis confirming the fact that no one has a clue how to resolve this situation.

    If you add up the value of every stock on the planet, the entire market capitalization would be about $36 trillion. If you do the same process for bonds, you’d get a market capitalization of roughly $72 trillion.
    The notional value of the derivative market is roughly $1.4 QUADRILLION.
    $1.4 Quadrillion is roughly:
    What’s a derivative?
    Derivatives are securities whose value is “derived” from an underlying asset (a mortgage, credit card debt, etc). A derivative is NOT an asset. It’s, in reality, nothing, just an imaginary security of no tangible value that banks/ financial institutions trade as a kind of “gentleman’s bet” on the value of future risk or securities.

    In laymen’s terms derivatives are merely bets without any real value. It amounts to a gambling bet about whether your neighbour will default on the payments for his house. AND it is absolutely UNREGULATED.

    They are not just on mortgages though, they can be on a wide range of things that financiers do not want to bother going to Las Vegas to gamble on. There is no derivative clearing house. No official report explains the risk or actual value of these things and the notional value of the derivatives market is not the same thing as the actual "at risk" money underlying these securities.
    It is entirely fictional to claim that these things have any real tangible value or perform any kind of wealth generation.
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      Oct 5 2011: Debra, derivatives are not the only cause behind the financial collapse. The deregulation of derivatives certainly played a huge factor to the collapse, but there were other issues at play. I also don't agree with Lindsay about derivatives being necessary. A good analogy for the evilness of derivatives is with the credit default swap derivative agencies like AIG - Imagine you buy a house. You need insurance on that house. In the world of derivatives, hundreds of other people could also take insurance out on your house that they purchase through a company like AIG. Now if your house burns down, the number of losses in the system becomes proportionately larger. Since CDOs (Credit default swaps) were unregulated, companies like AIG didn't have to set any money aside to cover losses. Instead they took the money from speculators and shoveled out bonuses to the top brass (over 9 billion dollars in 2007 just in AIG) as soon as the contracts were signed. But if the CDOs later went belly up (when your house burns down), the insurance company would be on the hook to pay up to the speculators. They couldn't. These people were taking massive risks with money they didn't manage properly. During the bubble , AIG's financial products division in London produced almost 1 trillion (thats 12 zeros) in credit default swaps, many that were backed by subprime mortgages. These are the kind of heinous and immoral business practices that screwed the global economy over and made a few people very very rich.
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        Oct 5 2011: Thanks TED for your perspective. I am always eager to learn. Can you tell me more? Can you tell me if you think that the financial collapse and the immoral behaviour of places like AIG and others would have been possible if it had not been for the repeal of the Glass Stegall Act in the USA? Canadians fared far better in the melt down because we still had stodgy old laws that kept our most ambitious, most creative banking imaginations in their cages to the great relief of all of our citizens.
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          Oct 5 2011: What a great question. Just a frame of reference for people not so well versed in economic policies: The Glass-Steagall Act was an act passed by Congress in 1933 that prohibited commercial banks from collaborating with full-service brokerage firms or participating in investment banking activities.

          To answer your question, no I don't think it would have been near AS possible. The repeal of Glass-Steagall though, was a finality to a chain of events set in motion in the 70s. Then, in the 80s, under the Reagan Administration, we saw implementations of policies that would ultimately lead to the repeal of the Glass-Steagall Act in 1999. This corruption in American economics is bi-partisan and spreads throughout the government on both sides of the political spectrum and is pushed by special interest groups with their hands in the pockets of virtually everyone on Capital Hill. It is the consequence of misinformation and fraud...and stupid Americans who vote against their own self interests. America is an optimistic and naive society that falls into the sack easily when one liners and pithy little maxims are whispered into its ear.

          I've always respected Canada, and thought America should be taking some cues from its northern neighbor. But when you think about it, America is usually last on board for moral social movements like say, abolishment of slavery, equal rights for women, equal rights for all races, tolerance of homosexuals, health insurance for everyone, etc etc. It doesn't surprise me that no ques are taken from Canada. Americans tend to take a condescending view of anyone other than themselves.
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        Oct 6 2011: HI Ted, I loved the depth of knowledge evident in your answer.

        Even so, I just cannot agree that the American people are stupid. I see them as optimistic and trusting, not stupid. Never was there as trusting a society as is depicted in the 1930s and 40s movies. I watched one the other day with Doris Day called "It happened to Jane." In it, direct democracy prevailed in a town on the eastern seaboard of the USA. Who knew Doris Day would play a radical who fought a railroad corporation to its knees through protest, media and the courts? Who KNEW that Doris Day would lead by example for a protest movement 70 plus years later?

        We should all be able to trust that our educational institutions will not teach us absolute falsehoods where it comes to money, that our governments will tell us the truth and that our societies will not be high jacked by organizations that combine the military and industry in ways that will ultimately make our country and other countries less secure.

        The American people did not deserve tyranny and debt slavery in exchange for trust. One of the things we are all learning is just why the revolutions against elites have taken place over the centuries. It seems that the unmitigated greed of the upper crust in almost every society gets beyond the ability of the masses or trusting people to ignore and they shake up the tail that wags the whole dog- sometimes violently but occasionally nonviolently. Let's hope this crop of elites has the good sense to bow to the realities of our situation and that those who believe in Ghandi's ways prevail.

        No, the blame for those things does not belong to the victims but to the criminals who perpetrated this fraud and this crime against the nation and the world economy. It is not too late to make it right. I hope this batch of elites makes it easy on themselves and the rest of us and not only steps aside but puts back some of their blood money so that more people do not starve or lose their homes.
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          Oct 6 2011: Well, we could argue just on the grounds of whether the majority of Americans are stupid or not, but that's a pointless and speculative argument. I want to be optimistic I really do, about education, about economics, about politics, about almost everything. Then I step outside. There;s no denying in my mind that evilness has taken control of the world. From this awful food distribution, to the rich stealing money from the poor, to religious fanaticism that hasn't been so violent in nature and theme since the Protestant Reformation...the list goes on and on. It seems with this illusion of money comes the will to bring harm to other people. Rousseu once said "The first person to stake out land was the beginning of pestilence and war." There are many great things about the human race. May of us are compassionate, caring, empathetic, and loving. But one thing has always been the most negative overall trait...greed. Right now there's so much unchecked greed happening, it's causing even more death and oppression than it ever has. John Locke believed that every human was virtuous and believed in small civil governments and a three branch system that inspired Thomas Jefferson and his buddies to adopt those very ideas in the experiment we now today call America. There were those (see Adam Smith) who realized our system of trading self interests had the potential to produce great harm and devastation to the world if the greed of that system was not properly handled. It wasn't. What we see now is an intentional dumbing down of society, not by an individual entity hellbent on domination, but by industries as a whole to make it easier to spread misinformation and suppress rebellion. It may sound far-fetched and conspiracy theory like but all one has to do is step back and take in the gravity of everything that's happening almost all at once. I see big things happening that will shape our world in ways we can't yet fathom. The question is, who will stand up and fight for it?
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    Oct 3 2011: In 2002 Mr.Alan Greenspan (former Federal Reserve chairman) described derivates as weapons of mass destruction for financial system.

    but derivates are also good tools for hedging the risks but it should be totally banned for speculations which is gambling.

    It is the responsibility of regulatory bodies to regulate these instruments & put limits on it. otherwise the dealers will take maximum risks to maximize their return ignoring the risks it exposes to financial system..
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      Oct 3 2011: Hi Rafi! I am glad you brought your insights to the discussion.

      I feel that It is entirely fictional to claim that derivatives have any real tangible value or perform any kind of wealth generation. Wall ST. perpetuated this fiction and it is also fictional that Wall Street is able to value these things or price them accurately. A bookie could do a better job. But thanks to Wall Street’s lobbying power, they’ve become the centerpiece of the financial markets.

      As early as 1998, soon to be chairperson of the Commodity Futures Trading Commission (CFTC), Brooksley Born, approached Alan Greenspan, Bob Rubin, and Larry Summers (the three heads of economic policy) about derivatives. She said she thought derivatives should be reined in and regulated because they were getting too out of control. The response from Greenspan and company was that if she pushed for regulation, the market would implode. The following article will tell you the whole story.

      Brooksley Born was not the only one trying to get Greenspan (a follower of the Ayn Rand school of philosophy) to see reason. There was another man who was trying mightily to let in the light of fact. His name is William White and you can read about that here:,1518,635051,00.html
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        Oct 3 2011: Hi Debra,

        Thanks for this. Over the 10 years I was on the NYS Baning Board the pressure was clearly there for banks to be able to get into the derivatives market.They were just itching to repeal Glass Stegal which had kept our banking system safe and sound and harnessed to financing economic growth for decades by separating banking from speculation..i.e. what goes on in the stock market or even the bsuiness of insurance. The business of banking was supposed to be about providing liquidity and funding for business growth through sound loans and lines of credit to smooth out cash flows and provide funds for investment in new technology, new physical plant, business expansion. That was also always the function of investment banks, howver investment banks were allowed more leeway as they are using all private consumer or business deposits.

        I totally tuned out of banking from the time I resigned the Banking board in 1997 until the crash. Catching up of late and in particlra reading lots of insider source documents like papers and advisories from EU and US central banks, I can see that derivatives are firmly and irrevcoably part of our global financial system. They are here to saty. I am also seeing that they do have many useful and essential functions that do stabilize market functions and do serve market fundamentals.

        Well put in an October 2010 study by the Wolrd Development Movement:

        "Speculation on commodity markets is sometimes referred to as ‘investment’, but it is nothing
        of the sort. Buying commodity derivatives is attempting to skim money from a notional value of
        outputs from the ‘real’ economy. It is not investing capital to increase production.
        Of money spent on commodity derivatives, not £1 is invested in increasing commodity
        production. "
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          Oct 3 2011: HI Lindsay, I need to learn more about what you know regarding the useful and essential functions of derivatives that serve to stabilize market functions. Can you send me to more source readings please?
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        Oct 3 2011: Debra, a few more thoughts that are more centered on the core issue of your comment on the role of derivatives in the economy..globally and for each nation. I am learning side by side with you and others here.

        What I see in the source documents of the FED and EU central banks, in the industry insider source documents is that the original intent and urpose of derivatives is to provide a sort of global, privately financed risk management system..pooling the many different kinds of risks associated with a specific real wolrd transaction or type of transaction. That makes sense to me and as I begin to explore Central bank weddedness to derivatives I am beginning to see what derivatives are supposed to do andnow that i understand a bit about "notional value" I am not feeling as panicky as I was about the $1.5 quadrillion derivatives bubble."

        For example ( and maybe not a good one as I am just beginning to grasp all this).

        A company wants a $1million loan ina sector that his bank specializes and with which the company has had a long term credit relationship..but the bank's portfolio won't have the diversification it needs if it gets over exposed in the company' sector ( or over exposed to that one customer)..through the derivatives market which pools that amongst pivate parties.The "notional value" added on the derivatives side is $1million but the expectation is that the company won't default (like insurance); the expectation is the derivatives contract will never insurance..we pay our premiums year after losses. A fee is paid to the entity taking the risk and the fees are the real income. That same bsuiness plan may generate risk demand that is many times the value of the project as each risk is separately absorbed at the full value of that risk.

        I'll try to bring some links.
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          Oct 3 2011: I guess I do understand that the first level derivatives perform the function of insurance and no one really objected to this use. It went to extreme insanity though as it got further and further from being linked to any original or tangible asset. Do you see this as the problem as well?
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        Oct 3 2011: Debra.

        We all need to learn too. if we are going to take a crack at coming up with a meaningful contribution on whether speculation drives food prices.

        We need to understand what derivatives are supposed to do and why central banks are so resistent to any tinkering via clearing houses, regulation etc .My post below ( we must have been writing to each other at the same time) is a very crude effort to explain what I am beginning to understand on that side. One of the best explanations with examples that I saw is a regional Federal Reserve document. In general most of the "pro side" on which resistence to any change is based is found in these industry source documents.

        The issue with food is that the FED and EU central banks simply seem to have turned a deaf ear to what appears to be very persuasive evidence, and even insider acknowledgment ( did you see the quotes I posted this morning in reply to another commenter?) of price distortions that are not rooted in real market conditions.They have drawn such a tight circle around any attempts to oversee, regulate or limit the derivatives market in any way that they simply aren't willing to take a focsued look at the food issue and what might alleviate price distortions there

        .It is my understanding that commodities are a small part of the "notional value" of derivatives and food even tinier and I have seen references from reputable economists suggesting that the price effect of speculation on food derives from thevolume of derivatives $ in comparision to the overall size of the commidities market... that it overwhelms the underlying market funadmentals. This may not be true of other sectors and may be a reason the FED and central banks have been deaf..because they haven't looked at that aspect. Maybe that's the key ..getting the fed to see that deriivatives in the commodities sector do drive price.
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        Oct 3 2011: Debra,

        In further answer to your question I did find one of the source documents I though was very interesting by the Federal Resrve Bank of Cleveland dated July 2010:

        It's interesting because it lays out in pretty simple terms why central banks (ours and the EU)are so hot on derivatives. with some excellent and persuasive example.

        More interesting than that, in terms of trying to undertsand why central banks and market regulators are not willing to listen on the link between market speculation and food prices this memo shows where their focus really is..what they are really thinking. Their only concern about erivatives, and I think this runs through ost of the "insider" white papers on its vulnerability to systemic failure..caused by and sell offs. In this paper and a many others they also seem concerned about the lack of data on where these derivatives are in the markey making hard to anticipate or forecast and respond to things that might go wrong.

        So far I haven't found any "insider sources" that are even internalyl responding to the issue of the link between speculation through derivatives and the price of key commdities like food and oil. It eally seem to be a deaf ear. My sense from central bank and insider source documents is they totally dismiss, pay no attention to anything that suggests a causal relationship between food prices and speculaion.
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      Oct 3 2011: Rafi

      ,Nice to meet you and thanks for joining our collaborabitive search for truth on this issue of whether speculation in commodities markets distorts prices above market fundamentals. Your Alan Greenspan quote is correct and well documented. He was the architect of the free market global structure on which derivatives have thrived and grown. Testifying before Congress right after the 2008 mortgage crisis was made public Greenspan admitted that he was wrong about markets self regulating to a level that serves the public interest. There was continual pressure from many sectors, in particular NGO's working to eradicate hunger and poverty, to protect the world's food supplies from the prce impacts of speculation. It was princpally Greenspan's assurance that Central banks,regulators and legislative bodies relied on. He admitted he was wrong.

      Thank you for the wonderfyl link on William White..a Central Bank insider who is telling the truth. But there is still almost immutable resistance from the Federal Reserve , the financial services sector and conservative elected officials to consider any restraints or additional oversight at all in the derivatives market. I have been reading original source documents including thise of the Fed and EU central banks . It is clear they are completely committed to derivatives.In commodities the main derivatives market is in index funds.price futures and most typically in hedge funds which co mingle food commodities with others like oil, silver and gold. The original intent of the commodities market was to fund and facilitate investment in production aand distribution of essential natural stablize and eliminate volatility from food markets. The problem with derivatives is they are not actually providing any liquidity that serves production and by swinging in and out markets causing volatility. The problem is derivatives aren't hinged to real supply and demand ..
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        Oct 4 2011: Nice to meet you too Linda. Thank you for your useful information.

        Beside from what you said, today banking has gone to far from its basics. what is your idea on this ?

        I,m referring to products like CDS & etc.
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      Oct 3 2011: Rafi then we need weapons for mass construction.
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        Oct 4 2011: Yes of course we need it. but we have to be careful otherwise someone will come & invade us.
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        Oct 7 2011: In Loving Memory of you friend Luigi.

        .thank you for your courage and your light..for your love of truth, for your wisdom

        .Light Into Light.


        Deepest sympathy to our TED friends who were closest to Luigi in life, for decades, and who brought him to us..Jaime, Andrianna, Conte & Baronessa. We stand with you in your grief and in your loss.
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      Oct 8 2011: Rafi the real revolutions are done with instruments and tools, not with weapons. Of course we also need intelligence, creativity and sensibility to build a mass Luigi said.

      The economy has a lot of shadows an masks, but if we defined the economy from the ethics, we found the real essence: Sharing with justice the proofit that we deserve from our actions.

      Today we are in confussion about. We think economy as money economy. And this is wrong focus
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        Oct 9 2011: Hi Jaime, thank you for the comment & I totally agree with you. The comment of Luigi above is one of his last three comments on TED.Com. I pray for his soul to be in peace.
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    Nov 1 2011: Alo....Lindsay really I'm touched by all this information about food. As you said its a crime against humanity.

    Please read this and think and feel.....
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      Nov 1 2011: Yes, Jaime, Luigi shared this lik with me. I know he worked there.. A wonderful organizayion doing great and needed work.
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    Nov 1 2011: A final link..excellent article

    And and a few thoughts.Some analysts say that food prices are close "to trend".. which has chased smart money out of food speculation ahead of the bust. Sounds like good news but the holders of all these speculative contracts are the pension funds of teachers, firemen, city santitation workers, ordinary folk whose pensions (the new term in the industry is "final income") will take big hits... Already most are seriously underfunded through a combination of "dumb money " investments in things like food derivavitives into which they were lead like sheep.. The smart money has already been taken out of the market . They are on to plastics. The "dumb money" is your pension, your parents pension. And the double whammy is these pension funds are insured by you and me the the US through the Pension Benefit Guaranty Fund which is itself already technically bankrupt and can't really afford one more corporate failure, one more failing pension..these are the giants..these pension funds.

    And who will pay for this bailout as we come to understand the commodties bubble has burst? Us..the 99%..the tax payers.

    Who will be hurt the most? Us, the tax payer, the 99%. Wall Street has already taken its profits.

    But is this good news for the billion already in chronic hunger, for the 70-80 million new global citizens falling into chronic hunger every year? No it's not. Because the plutonomy controls the world's food supply and food prices are going up and up and up with no sign of a fix in sight.Payments to farmers/producers went up 6.9% this past month..It hasn't reached your food budget yet but it will wihin 30 days or so..slowly..big retail chains have agreed to bring the change up slowly so as not to cause a panic. Can you afford an expected overall rise of 10% in what you pay for basic food stuff at your local supermarket?Occupy your food Aerin at Occupy Cafe says
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    Oct 27 2011: As we approach the closing week of this discussion, and with little hope of regulatory or statuatory relief from the effects of pure speculation on food prices anywhere on the horizon, I invite all of who have participated and those who have been monitoring to offer their views on how to keep this important issue in the fore and how to continue to press for relief.

    This one insider blog suggests that the 800 pound gorilla in the room will simply feed himself to death and take a big tumble..but when? long will that take? many more 100's of millions will slide into glovbal hunger?

    "In the author’s opinion, these Funds are a terrible investment and you should stay away from them. Yes, commodity prices may continue their rise in the future. However, it’s inevitable that prices will get too high and the weight of higher production, will force prices back down. The commodity bull market is very much like the bull market in stocks in the late 1990s. During that time, money was pouring into Mutual Funds at an unprecedented rate. This caused stock markets to move higher and higher until they greatly exceeded any reasonable fundamental valuation. The same is true for commodity prices. Investor demand rather than true supply/demand fundamentals are constantly driving prices higher. Eventually, commodity producers will dramatically increase production to profit from higher prices and prices will violently correct downward"

    What about a massive campaign of divestment focused on the wolrd's largest pension plans or charitable/religipus institutions, ege the catholic church? Could an early cash in of the massive passive by key investors hasten the "natural demise" of this insidious part of the market and its insidious effect on the world's poorest and most vulnerable?
    • Oct 27 2011: Lindsay
      For some reason I have not been following this thread, which I now deeply regret.

      Your final question in your last week summary though is one I do wish to comment on.

      I feel a massive crash is never good for anyone. What might then happen would be a decrease in available commodities to the very people who need it most. There are some farmers who might want to let food rot in the ground rather than sell it at a cratered price.

      This is a complex issue. It is one where the people who suffer most are the ones with the least control.
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        Oct 27 2011: Hi Michael,

        Yes..have missed your voice here and appreciate your comment

        .The "800 lb gorilla in the room" isn't the normal commercial part of the derivatives market which supports and provides liquidty , risk management and real price discovery for actual agricultural production and is the purely speculative ( non commercial part)

        .I was assuming, perhaps incorrectly that the bottom could fall out of the speculative part of the market without impairing the commercial sector.Is that an incorrect assumption?

        Would a crash in the purely speculative end of the market, the part where Goldman Sach, JP Mogan, Deutsche Bank and two or three others are making all their money in any way adversely impacts the commercial end of the market?

        Wouldn't it just be spitting up the hairball and wouldn't prices then automatically correct to to theiir true equlibirum price?I am wondering too whether the New England Comples Systems Institute whose model prompted me to open this discussion could be expanded to try and model or predict the tipping point in the non-commercial end of commodities where price would stray so far from any realistic market fundamentals ( even the worst case fundamentals we have before us now) that they would just automatically blow themselves out.

        Maybe they could also model whether that blow out would actually bring an immediate market equilibirum.The entire premise of this question has been that pure speculation, the non commercial part, needs to be taken out of markets so that food markets can "discover price" more acurately and establish a sustaianable vlable price equlibrium. The whole arguement in favor of allowing these non commercial funds to continue trading is that they have no impact on market I just logically concluded that their demise of their own greed and gluttony would be a good thing and am only concerned it might not come in time.If we could predict might hasten divestment
        • Oct 27 2011: Lindsay
          Yes the speculative might fall, but I think it would take months for "the real price" to balance itself out! During that period then I think you would find a decline in production and supply. It would be interesting to chart the supply side of the market against the speculative price. Obviously there would be a lag. It takes time to raise a hog or harvest corn. It is a balancing loop with a huge delay.

          Could you post a link to the website on Complex Systems please? I have been an avid student of complex systems for years.
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        Oct 27 2011: Michael..the link is

        It was also posted in the framing of the question above.

        I have just been reading the technical appendix and trying to figure out whether they could adapt it to model what circumstances would prompt a speculative crash and also model how long it would take to reach a true price discovery, a true equilibrium. I think it could. Maybe it alreday has as I look at it..but I can't tell from the documentation that's there.

        As you can see it is mainly a theoretical model..especiallythe piece on speculation where they added in and mapped the tipping point where speculation assists price discovery and then distorts it. I would be interested in your comments.

        As you can see they are referring to this conversation in a long list of links which report on and analyse their model. I would be interested in your thoughts.
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        Oct 27 2011: Michael,

        Just found this interesting blog which believes the speculative long only comodities bubble is alwalreday on the verge of blowing itself up as prices are now ( b force of market) within 2 or three deviations of market trends ( iow..have self corrected). He (Randall Wray) says when prices hit trend the speculative bubble will blow itself up and the market willalready be at price equilibirum..will alreday have returned to a true commercial price discovery.

        Of course this isn't about food per se and the food bundled with other commodities in the big indexes eg Goldman Sachs. But I hope he's right. that would mean despite inevitably rising food prices ( from factors in fundamentals that can't be immediately corrected)..ther at least won't be an added inflation of pure speculation.

        Also if this is good market analysis and only dumb money stays in as he is suggesting will be the case..all the more momentum for accelerated divestment of long only non-commercial food commodity price index funds. If divestment happenfed fast enough Goldman, JP Morhan and the big 5 who generate 70% of this business might take a well deserved major hit.
        • Oct 28 2011: Lindsay
          Please allow me to read both the paper from the Systems approach and the blog before I answer completely.

          Even though I do not care for the giants and their potential manipulation, anything crashing can disturb the whole system and produce a myriad of consequences.
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        Oct 28 2011: Agree Michael..that is the nature of complex systems..that relationships exist of which we are not aware

        .I look forward to your analysis

        .Also, I have asked whether the NECSI model can be used or expanded to visit that predict whether any blow out of the purely speculative commodities derivatives would be strictly within that "community" with no splash over to the fundamentals

        .I wonder if Randall has any thoughts on that?
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    Oct 20 2011: OXFAM gives us an opportunity to act as global citizens and make our views known to the G20 which is about to convene in Paris. At their website there is a petition which gives us a opportunity to express our concerns about the food crisis and about the role of speculation in pushing tens of millions more every year into chronic hunger.

    Also at the their website is a truly excellent plain english paper which explains how and why world commodities markets allow pure gambling on food NOT A GAME:SPECULATION V FOOD SECURITY Regulating Financial Markets to Grow a Better Future ( Oct 3, 2011)

    At the moment, food seurity seems to have been overs shadowed at the G20 by the european debt crisis. OXFAM is a strong and faithful voice for the world's hungry. An important quote from their excellent paper speaking directly to the question we are exploring in this conversation:

    “The precise impact of speculation on food prices today remains disputed and cannot currently be proven,not least because of the lack of transparency of financial markets.6 However, this should not preclude action on the basisof legitimate and well-founded concerns” (P2)

    "“ And because food price volatility can be a matter of life and death,a precautionary approach must be taken to speculating on agricultural commodities. Governments must act, domestically and together through multilateral mechanisms, to prevent harm by curbing excessive speculation through greater transparency and regulation.” (p2)
  • Oct 17 2011: I helped create a website specifically designed to help people understand the problem of excessive speculation in commodities - There is a lot of both background and up-to-date information on the subject. I can help you find numbers that you need, etc.

    Also, see this page with more than 80 studies from respected institutions showing that excessive speculation is a problem:
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    Oct 13 2011: Getting Used To Life Without Food Part I

    I just found this amazing article by William Engdahl ( June 29,2011) which put the world food crisis and the dismal outlook for food security/food access for the world's poorest in the context of a calculated, determined , long term global privatization of agriculture.

    Reading this very simply written article it became crystal clear to me for the first time that both parts of the food crisis--the globally broken agricultural system and the explosive price escalating effects of pure speculation--are just parts of a global scheme of the privatization of agriculture

    The food insecurity and food inadequacy caused to countless millions already, millions and million more to come is the "side effect" of the influence and control exerted by a handful of global agri business companies and financial institutions who are turning record profits on the food crisis

    . The plutonomy holding us all hostage on the most basic elements of our ordinary lives

    .Now that I understand both parts of the food crisis in the historical framework Wlliam Engdahl lays out, I am not at all optimistic that the G20 summit or the IOSCO reform initiative will deliver any meaningul long term correction to our broken global food system

    .I am not at all optimistic that anyone would even consider or recognize the need for immediate measures to buffer the world's most vulnerable, the one third among us for whom food is a chronic issue, against the continuing rise of food prices, the continuing distortion and inflation of foodprices through pure speculation in the commodities markets.

    The more I look and study. the more I wonder whether it's even possible to unwind any of this.
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    Oct 12 2011: In this TED conversation, “speculation” refers to price indexes and hedge funds that are purely speculative, purely non-commercial.

    I haven’t found any data yet on what % of outstanding derivatives contracts are "non-commercial", nor any studies that try to isolate the effects of these " casino derivatives" on the market

    .I think that is major problem with the whole debate on the effect s of speculation on food prices and global hunger. Most of the studies we have brought to this conversation make a generalized assumption that the drifting ,distorting, price elevating volume of trades in food are non-commercial index funds, purely speculative contracts.

    Many of the white papers we have brought here describe and distinguish a “speculative contract” from a contract that provides liquidity to food markets but I have seen so far only one study that attempts to quantify how much of the food commodities trades are “non-commercial” (purely speculative).France’s intervention proposes classifying all funds as either speculative or commercial with a view to limiting speculative contracts but nit an out right ban on pure speculation.The UN FAO special Rapporteur urged this approach globally in a September 2010 advisory Food Commodities Speculation and Food Price Crises: Regulation to reduce the risks of price volatility“, De Schutter outlined steps to prevent improper speculation in the commodities derivatives market.

    ( )

    But until that data is available it seems unlikely the FAO or anyone else would support an immediate ban on all speculative food commities trading and therefore no protection for the millions about to fall into hunger

    .Is there any data out there already ?

    Can we find it and bring it here?.
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      Oct 12 2011: I don't know the figures but thought of this event.
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        Oct 12 2011: Thank you Frans.

        I remember the Hunts with Silver.Tim Wise brings some astonishing stats ( did you see my post above with a link to his jaw dropping article?)

        What it amounts to is that for the sake of huge profits, mainly for Goldman Sachs and JP Morgan Chase and three or four other global players, we are allowing millions to fall into chronic hunger and stretching the household budgets of ordinary families world wide to a point of impossibility.

        When I framed this question I was being a bit provocative in suggesting it might rise to a crime against humanity.

        .I no longer see that as facetious or provocative..

        I think it does rise to that level.

        I think it requires more of the UN FAO, more of all the key central bankers..especially UK and our Ben Bernanke, more of all the commodities regulators

        .I think it is urgent that all speculation (non commercial trades) in food be immeditaely haulted for the sake of the world's food security, for the sake of the poor, working class and middle classes world wide. Just classifying traders isn't enough.

        Luckily the G20 is about to visit that issue as reported in today's Telegraph"G20 urged to help end world hunger by stopping commodity speculation

        "More than 450 economists from 40 countries have urged G20 finance ministers to prevent financial speculation in commodity markets from driving up food prices and fuelling hunger"

        Did you know that 20% of the UK's GDP comes from exactly this kind of trading..I think we can anticipate not much eagerness to ban speculation on the part of the UK authorities

        .Let's keep looking for articles and bringing them here and lets 's track what is said at the G20 and about it.

        Thnaks agin Frans for being aprt of experiment here at TED Conservations in collaborative investigative reporting.
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    Oct 11 2011: Hi Vineet,

    Nice to see you again. Thanks for checking back in.!!!

    I agree it is very hard in this format to keep everyone infomred and in the flow of what has developed and what has been exchanged

    .I am planning to do a weekly summary and post it on Sunday to catch people up with developments. Here is the summary for the first week

    We have a new collaborator, Marshall, who proviided some interesting comments and some interesting links. Also an interesting exchange spinning off a Ghadi quote Debra Smith offered.I also had posed some additional questions to you..they should be in your email inbox??? If not, I'll post links to those recent comments of yours to which I replied

    .I think we are getting somehwere here. I hope you will stay with us and continue to collaborate.

    What we are trying to focus on now is whether the 7 countries who house the majority of the world's chronically hungry people can weather the expected continuing wave of rising food prices and further inflation of speculation or whether that will cause milions more to fall into chronic poverty?

    If these countries are not in a position to weather the projected continued rise in food prices and the continued volatility, inflation and instability of pure speculation, which of these 7 coutries would benefit if speculation in global food markets was taken completely out of the picture.

    The U.N. FAO recognizes that speculation will contribute to the coming crisis and that millions more will in fact fall into chronic hunger but is not yet willing to call for an end to all pure speculation in food commodities nor declare a humanitartian food crisis. Is this a reasonable position?

    We are also exploring wherther some sort of further global relief will be needed in these countries..The UN FAO is emphasizing national self reliance not aid.

    good questions to start your new ag career on?
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    Oct 10 2011: Linda even money is commanded by emotions. The reason is a minor part of the whole thing. But also is the pefered mask for greed.
    • Comment deleted

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        Oct 10 2011: Tee Cee

        money has nothing to do with reason....just with emotions. The reason is the mask.
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    Oct 10 2011: Interim Summary

    In the first week of this collaborative effort to answer the question about the role of pseculation in the food crisis that pushed millions more into famine we established that

    (1) speculation added to price rises in food that were driven by market fundamentals including the effect of bio diesel on the demand side.

    (2) global food markets are poised to continue rising because of these market fundamentals, principally that we are globally consuming more than we produce) and that is setting up the prospect of even more influence from speculation

    (3) Everyone except Ben Bernanke and EU central banks acknowledges that speculation has in fact distorted food markets and that the link beyween dramatic rises in food prices and dramtic rises in wolrd hunger is obvious

    (4) No actions are planned which will remove pure speculation from food commodities markets even though almost everyone recognizes the dangers of food speculation on world food security, food access, food adequacy

    (5) many are looking to specially designed commodities markets in the worlds poorest nations as a strategy for improving food securty, food market efficiencies..Africa already has one. We hope to turn our attention in this conversation to exploring the wisdom of this strategy

    (6) We haven't surfaced any stop gap or imediate measures intended to buffer the world's poorest nations against the further certain impacts of rising food prices fed by more speculation.

    We hope to use this conversation to see if there are any such measures available.We have been looking at India and Bangladesh in particular. As a collaborative, I think we should now turn our attention to immediate measures which might insulate the wolrd's poorest countries from the certain impacts of food prices fed by speculation to prevent millions more falling into famine
    • Oct 11 2011: I don't think this summary fits the real situation with food prices or the discussion here about it.

      I'm confused how you are comfortable stating it is "established" that speculation added to and distorted food prices and basically everyone agrees except Ben Bernanke and EU central banks. Because it's really not borne out by evidence or what people have raised in this thread. Don't want to spam, but there are papers you have seen and discussions that demonstrate this at NYT 09, NYT 11, KM, MR. Comparing agricultural markets with and without strong futures markets and included or not in commodity indexes raise further challenges.

      I didn't see good digging anywhere into the paper that you opened this thread with, which is a shame. That's one of a number of pieces that contends speculation is a major factor. I did look through it and thought it has a lot of flaws, but it doesn't seem anyone who agrees with me has had much to say yet.

      Your summary is being a bit cute by acknowledging the driving role of fundamentals and the strong biofuel effect (which operates through fundamentals in the form of increased demand). Claims speculation "added to prices" and is "setting up the prospect of even more influence" are comparatively hard to assess. But the focus and call for action here is on speculation, not how to have real positive effect on ag fundamentals or causes of worldwide hunger.

      Would it make sense to refocus on the economics of agriculture and causes of hunger (not entirely coupled, eg, politics and war) and spread knowledge and search solutions there?
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        Oct 11 2011: I agree with you Marshall, that the larger and more pressing issue in food isn't the role of speculation but the underlying issues of global food markets..that's a long term problem with no immediate fixes.

        As a comsumer advocate and former bank regulator ( representing comsumers) I am particularly interested in bringing to light the unintended and overlooked effects of unregulated markets on the poorest and most vulnerable. That's what attracted me to the topic for this conversation

        While I agree that the Cambridge model that attracted my interest overtstates and misrepresents the role of speculation in food prices, I do still feel that the issue of pure speculation in food is an importnat global policy issue and that we do need multilateral action to get these non-commercial indexes out of food markets.
        Also my sense is that it is urgent ..that millions more in the coming months will be pushed into chronic hunger. So I would like to stay focused on those issues in this conversation. and hope you will stay with us here and help look at what the most effective multilateral interventions might be

        My exchanges with Vineet and more deeply with Salim have been looking at the specific circumstances of food markets in India and Bangladesh..two of the 7 nations housing most of the worlds chronically hungry people to see whether removing speculation from global food markets would have any positive effect. Salim, who lives in Bangladesh and has a good deal of knowledge on anti poverty efforts in his country seems to think that while Bangladesh's main problem is distribution and food access ( not food adequacy) that prices of food in Bangladesh are affected by world markets. So taking speculation out of food prices might help there. In India, Vineet's focus,speculation is not a factor ( gov't price controls) in their commodities markets , he says so removing speculation from global markets might have no effect.

        No insight as yet on the other 5 nations.

        Can you help?
        • Oct 13 2011: There are a lot of quite controversial things that should help agricultural production and food security.

          More food around the globe should be grown locally, but they need better infrastructure and seeds for that. But outsiders buying up land and GMO are very controversial.

          Stocks should be better managed to buffer harvest variation, but these are now poorly managed in the developing world and have a lot of waste. A good local market mechanism to manage stocks seems crucial too. This is hard to develop. We also want to collect better global ag stats, to make fewer surprises -- quite a big project to roll out in so many diverse places.

          We also need to convince countries with poor harvests that export bans lead to global problems, but this is again very hard because affected countries see the bans as directly serving their acute need.

          Then there is the issue of subsidies in the developed world with its great industrial scale farms -- this makes them very competitive and is very popular politically, but it poses challenges to local production in developing countries that cannot compete with it.

          And biofuel mandates and subsidies clearly are boosting demand and linking ags to energy markets. If you want to boost food supply and lower price, stop doing that -- politically still hard.

          Some charities do pursue projects like these. And there is lots of coordination by international organizations and helpful research. Here is a neat new piece, plus I like

          In the face of so many challenges, I'm afraid fighting financial speculation that doesn't touch physical markets is a red herring. It's clearly great marketing and maybe the finance guys deserve to get all beat up, but can we channel all the interest generated into solving our real problems?

        • Oct 13 2011: Plus to fight financial speculation if that's what we want, we are taking an odd approach. To punish speculators who buy at prices higher than fundamentals justify, it's by far most effective to make them lose money by pursuing policies to promote robust, efficient agriculture as discussed, and to develop information systems and solid research that make this reality clear.

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        Oct 13 2011: Marshall

        Thanks for your further thoughts. No question that the fundamental issue is agriculture itself ..not just food self sufficiency food security and 100% access in the world's poorest countries but larger issues about consumption (e.g. food meats are eating 30% of the wolrd's grains), agricutural production technology (local seeds, local growing, protection of local water technologies for higher yield, drought resistance and soil preservation without harmful chemicals or genetic engineering) and moral/poliical issues like whether any nation can rely 100% on imported food..not produce any food of its japan. Doesn't food self sufficiency mean every nation feeding itself? I would love to see a separate TED Conversation on these issues

        .I cannot agree though that exploring this issue of speculation adding fuel to the fire of continuing food price inflation is a red herring. Merrill Lynch estimated that pure speculation in commodities ( non commercial transactions, transactions which don't support or provide liquidity for food production itself) add as much as 50% to the costs above what would already be record high food prices. The U.N. FAO doesn't agree its a red herring either nor do all the G20 countries now about to convene a summit on food nor the 450 senior economists who have urged action to limit speculation in food.

        To a person in a poor nation where food costs are typically 50% of income getting rid of that 50% increase which speculation adds to food costs would provide an immediate 25% increase in income available to meet basic living needs. The world simply cannpt afford to have that level of price inflation in food supply. It is a global threat to food security.(every nation having enough food to feed all its people)

        .What do you think of the idea of all nations providing food aid without strings and in cash and only through valid humanitarian NGO's?
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        Oct 13 2011: Marshall

        Thanks for that commentary by Michael Roberts ( How to Feed the Planet Without Destroying It)

        I happened to catch that NPR spot in transit yesterday and had the exact same take as Michael Roberts. Yeah, those are the facts but as they say here in Maine" You can't get the'ah from he'ah"

        Take a look at the link I just posted on Wlliam Engdahl's article. Understanding that the "he'ah", the here and now of the facts laid out in the NPR piece is the result of a 30year process of global food privatization certainly makes it very hard to imagine how we turn all that off and redirect the planet to the the "the'ah" of sustainable agriculture and 100% food security/food access

        .I don't see that shift emanating from the UN FAO. I don't have much hope that the G20 or the IOSCO initiatives will be envisioning or moving towards such a shift

        Michael Roberts has asked the most important question, the question that this TED Conversation is ultimately about

        "How do we get 'the'ah' from 'he'ah'?"
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        Oct 11 2011: Hi Marshall..really glad to have you here..appreciate your thoughts and all your links and hope we can do some further work together on this.I agree with you that the Caimbridge model I opened this conversation with doesn't stand up as "proof" about the role of speculation in the food price hikes but at the same time, the assumption in your 2009 article that speculation was a temporary blip has since been widely acknowledged to be wrong. Speficially wrong:". Largely speaking, food prices are now once again being determined by the fundamental forces of “real” (as opposed to speculative) demand and supply. Thankfully, avaricious speculators have now shifted their attentions away from carrots and beans back to more conventional markets."

        In 2009 this was the view of the U.N. FAO as well at the Rome summit on Food Security. Speculation was barely mentioned. By 2011 even the the FAO understood how dangerous pure speculation was on top of food fundamentals..One 2008 report got it right"The report noted that the unlimited and unregulated index fund "bets" could roil commodities markets for at least 20 years. The danger of unregulated index unds and OTC trades to both food security and the agricultural production finance system should be apparent to anyone who looks beyond the great limitations of CFTC data and is currently no multilateral framework to respond to global speculation in food prices".The report noted that there is currently no multilateral framework to respond to global speculation in food prices. Indeed, financial industry lobbyists are pressing World Trade Organization negotiators to further weaken the ability of governments to regulate finanancial markets and commidity exchanges"
        The UN FAO agrees that the changes France made are needed on all exchanges.
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        Oct 11 2011: Your NYT 11 on inadquate global production is the key fundamnetal..and an excellent artilcle and also the the core issue that will keep speculators engaged on food unless something is done to take all non-commmercial indexes off the markets.

        .Your KM blog is not so far from where I came to reseraching this. It is just not correct to say speculation caused high food prices..It's more a perfect storm..volatility and further inflation from speculation on top of some pretty serious and long term market fundamentals..most importantly inadequate supplies( as your NYT 11 addresses). These very conditions are what will keep food prices trending higher and invite the further inflation and volatility of speculation inturn driving millions more into hunger. Taking speculation out of food markets will certianly not fix the long term food markets or protect poor nations from more devastating will only remove the further inflation caused by speculation. Also I am beginning to come around to the idea that clearinghouses are not the answer. I can see some of the difficulties with Dodd-Frank. Derivatives are too ingrained in global markets for some of what s in Dodd -Frank...Prohbiting all non-comercial food indexes seems to be a more doable and targeted response. But I think it needs the further suppprt and call to action of the UN. because there are so many difference markets involved with no coordination.

        Enjoyed your MR1 & MR 2, Michael Roberts blkog and will track that..he is doing good work there.
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        Oct 11 2011: Marshal

        lI think one of the best papers I've seen on the effect of speculation on food commodities markets its Tom Lines April 2010 paper "Speculation in Food Commodity Markets" ( having trouble getting a link directly to it but you can link to it from a google searchA few quotes from it

        “It was estimated that investments in .. commodity index funds increased from US $46 billion in March 2005 to $250bn in March 2008"

        .“ In corn (maize) futures, Morgan Stanley Bank estimated that the number of outstanding contracts ('open interest') increased from 500,000 to nearly 2.5 million between 2003 and 2008.”

        “In the FT on May 12th, 2008 a(randomly selected) Canadian companyadvertised 18 funds,….. Two of(which) worked on the grains sub-index of commodity prices. Invested in a price index, that is pure gambling; these gamblers use otherpeople's money – the savings accounts, pension funds and life insurancepolicies of the general public. And their actions move the prices of the underlying commodities.”

        “But why at that time? The reason is simple. Financial investors do not mindwhere or how they make money, as long as they make it. After the credit crisis started in August 2007 they found that prices for shares, commercialproperty and financial derivatives stopped going inexorably upwards. Bu tcommodity prices were doing so and they piled into them. "

        It goes on to analyse who is who in this sector and provide some very compelling stats.An the realities of continuing incrases in food prices is what will keep speculators interested in food .

        TheUN FAO recognized in February of this year

        "France and FAO have blamed financial speculation in commodity markets for contributing to soaring prices"
    • Oct 17 2011: Commodity markets had responsible limits on speculation from 1936 until the 1990s when deregulation mania led Congress and regulators to remove limits to speculation. This helped lead to the food and energy bubbles of 2008 and 2011.

      To rein in the problem, simply reinstating those limits would go a long way. Unfortunately, the CFTC is set to release new speculation limits tomorrow that will almost surely be far too weak to have any real effect. We think that commodity indexes, Exchange-Traded Funds and Exchange-Traded Notes should be banned because they are especially detrimental to the functioning of commodity markets.
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        Oct 18 2011: Dear David,

        First, welcome to this TED Conversation. The depth of your background and the excellent work of your global initiative to protect food markets against speculation is impressive. Your voice is needed and valued here.

        As I am sure you saw, there was excellent commentary at Thomas Reuters London yesterday on the final rules on commodities position limits provisions of Dodd-Frank. today. The commentary frames the expected immediate battle in court in the context of a long term well established trend in the opposite direction, towards complete deregulation of private market operations.

        The article sees todays rule approval as setting up a major clash between the Obama administration and democarts Vs. business interests and republicans who have an edge with the courts


        Of course, todays ruling is not specifically about agricultural commodities and not specifically addressed to any relief for the price distortions and inflations resulting from speculation in food. The CFTC, though, has previously spoken to that and acknowledged the problems(the link is above and also at your web site)

        .Also, none of Dodd-Frank , as I understand it, deals with the long only nature of the price indexes in food and agricuture. What are the implications of that for the divestment your global coalition advocates. Is a program of agressive divestment of all food indexes possible? And based on th response of the California pension system at yoiur website would pension fund managers be receptive without substantial backlash and pressure from the pension fund benefciaries?

        I encourage all who have particpating in or monitoring this conversation to visit your excellent web site
        • Oct 18 2011: The rules that the CFTC approved today do deal with agriculture commodities, as well as energy and metals too (28 commodities are covered by the rules). Theoretically, it should help limit excessive speculation in all of these markets, but the limits they established (25% of deliverable supply in the month closest to delivery and 10% of the first 25,000 contracts and 2.5% thereafter) are likely too high to have much effect, though according to their calculations, 85 metal traders and 84 ag traders will be affected.

          They also place no limits on speculators as a class, which is what is really needed to stop excessive speculation. The new rules will only really stop market manipulation.

          And, as you point out, the limits do not address the problem of long-only commodity indexes and ETFs. Hopefully, once the added information starts coming in from the new swaps reporting rules, we will get better data to put in stronger limits and targeted reforms to ban or limit indexes.

          We are looking to expand the divestment campaign with some university campaigns next semester and will begin approaching other pension funds too. We found the CALSTRS board very open to our input and willing to make changes in their investments. These indexes and ETFs have had TERRIBLE returns due to the fact that so many commodity markets are in contango (when futures prices are higher than spot prices due to so much money going into futures months). So it is really not that hard to convince pension funds to get out of commodity derivatives.

          As we said in our letter to CALSTRS, if you want to take advantage of rising commodity prices, commodity equities are a far more legitimate investment and have had much higher returns than commodity derivatives.
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        Oct 19 2011: One of two dissenting votes on the CFTC’s final rule on position limits yesterday was Jill Sommers who said she did not believe the rule as adopted would have any effect at all on reducing food or commodity costs.
        Your thoughts on this would be much appreciated. I think I agree with her. My concerns are
        (1) that the 25% limit on positions is too high..I think it still allows for too much control and agree with Bernie Sanders that it should be a much lower limit..he suggests 5%
        (2) This doesn’t even touch the OTC commodity trades or the Goldman Sachs, Morgan Stanley JP Morgan food related derivatives markets, Also allows banks , the worst among them JP Morgan, to continue exemptions permanently via hedge fund exemptions
        (3) All of the off exchange( OTC), which is where the food related speculation is postponed until 2012, 2013 when more date will be available. The continuing food crisis is right now.
        (4) It is energy issues that have drive ISDA and industry comment on the implementation of Dodd-Frank from the beginning and up to the end..see ISDA’s October 3 letter to Gensler. No one any where along the line has any concern at all about our central concern food should have its own rules.
        So, at the moment, from what I understand , I see no immediate or long term help at all in yesterdays ruling.
        Also since we know food prices will continue to rise on agriculture fundamentals and the primary speculative food derivatives are untouched by this ruling, won’t it make your work of divestment focused on large pension funds much harder . Doesn’t it all make food speculation even more attractive?
        • Oct 20 2011: Yes, the limits are too high to have much effect at all. And they put no limit on speculators as a class which is what is needed. The OTC markets are going to be put through exchanges and clearinghouses with few exceptions, so the problem of dark markets should be eased, but like you say, it will be a while before any changes actually take effect - probably not until after the next crash...
          It is frustrating that most of the focus has been on energy, but energy prices have a heavy effect on food prices, so it's all good. And there are already limits on many food commodities, but many exceptions were given in the 90s through No Action letters.
          I don't think the rule will have any effect on our divestment campaign, hopefully.
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        Oct 21 2011: So, we seem to agree that there is nothing on the horizon that will help the estimated 70-80 additional million that will fall into chronic hunger while we are waiting for the regulatory fix, the global multi lateral regulatory fix, that will take pure speculation out of food.

        What do you see as an immeditae short term strategy?

        Would it help if all nations sent their aide in cash via something like OXFAM?

        Would immediate debt relief help..immediate release from the onerous obligations attending this debt?

        Is it serious enough to call for an immediuate ban on all purely speculative trading in specific food grains?
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    Oct 10 2011: Lindsay some music is nice at this time specially this:

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    Oct 7 2011: I am opening th s thread on the context of policy and oversight issues in which this speculation on the world's food is allowed to happen..not justhere but in Canada and all the EU nations.

    .(1) This is not just a "gentleman's club" of private capital risking their own money.. a sort of LLoyd's with a new twist..funding for these speculative investments is coming from ordinary working class and middle class citizens..from their pensions, from their savings, their college savings plans, their 401K's their IRA's and equivalents in other countries..

    Just one example of many:

    The Illinois Teachers Retirement System is now underfunded by $44 billion or 6o.9%. In just one quarter the pension fund lost $515 million on its derivatives portfolio

    .(2) without intervention by law and regulation in all nations ( not just he U.S,) commodities speculation will continue to grow. Food index funds and other food related speculative derivatives are turning up on all the insider reports because the market fundamentals for food are weak and will cause continually rising prices. More people will be forced into famine..more and more. (Again, of course, the funadmentals themselves are going to drive millions more into famine even if we act right now to end speculation in food markets..but we can save the millions more who are pushed over the edge by speculation in food markets.)

    I will bring more links and quotes here but invite all to do the bring case studies on losses to the meager savings of working bring ore documenttaion on current teands in food derivatives.
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    Oct 7 2011: I have an observation about my country... which is once food price goes up for any reason stays there or goes up only never comes down.... what is the economics behind

    Fasting month (being a country with 85% muslim) is the best month for price hike of any food product , you name it, price just goes up..... then never comes down.....and that adds up mor people to hunger for whom whole year can become fasting year........

    Any idea what kind of economics it is ?
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      Oct 7 2011: I am not an economist , but here is one article that responds exactly to your question and points to global fundamentals.

      As Vineet has emphasized in several posts here the issue is investment in agriculture production and technology ( not GM seeds and not the world's disastrous insisence on exported grains as foreign food aid but real, country specific investment in food security and food self sufficiency.

      At the moment speculation is just part of the perfect storm that is keeping global food prices high. globally we are living on reserves ( consuming significantly more than we produce).the fact .that underlying fundamentals are keeping prices high draws in and attracts speculations in food adding to prices..keeping them high, adding to market instabiility

      There aren't any short term complete fixes to problems like this but there are short term and immediate measures that would help

      .(1) all countries could adopt a policy of self sufficiency for foreign aid..Canada's rule is a good one..50% of all food aid goes in cash not canadian crops

      .(2) all countries with commodties markets are doing the same thing ( except India which is far from self sufficient and has fought of speculation through government price controls)..the reforms to get speculation out of food commodities are well researched and pretty much agreed on by all experts..those could be implemented right away.

      .(a) limits on on non-commercial ( ie speculative) instruments
      (b) limits on market share to prevent "cornering the market" and manipulating prices

      As Vineet correctly reminds us the big fix is a long term process in poorer nations..a process of self sufficiency and independent food security of investment in soils technology, reclamation of indigenous seeds, banning of Monsanto GM products and of harmful fertilizers..of rebuilding and protecting water resources
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        Oct 7 2011: What Lindsay? Which Luigi ? When? How ?

        None need to be economist to understand that Lindsay, that's partly due to speculation, partly due to intensional distorsion of market mechanism, no economics theory behind that's what I feel
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          Oct 7 2011: Salim nice to say hello to you again...
          ...Luigi Vampa died in Rome in an car accident. Two days ago.

          Please Pray for him.
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          Oct 7 2011: I think you are Salim..I was just looking at the UN/IMF/World Bank initiative to relieve soverign debt up to 100% for 40 eligible countries who "meet initiative requirements". Is Bangladesh one of those 40 countries? Do you know anything about that or have any observations on whether the terms are fair and honroably directed toward soverign food self suffuciency free of outside market influences, free of ties to monsanto etc.
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        Oct 7 2011: Ohhh Jamie my friend how you came to know?
        How come Luigi is not here, there in Rome !!!
        Luigi opened a thread here once that started with "Automobile is ferocious.............." we talk lot about bicycle, walking, Luigi my dear friend was encouraging everyone to have and ride that automobile took him away ....!!!

        Ohhhh Luigi my friend ,it's ruthless blow, shocked I am. speechless I am .... all my best wishes Luigi

        Thanks Jamie & Lindsay for the news....the sad news though
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          Oct 7 2011: Salim,

          Debra has started a one day memorial for our beloved and dear Luigi here at Ted..maybe copy this post to there?
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        Oct 7 2011: Lindsay, don't know anything with the new jargons of UN/IMF/World Bank ..... may be I lost interest about their intension.

        You might remember my post in other thread about the role of those bodies .... how they kill our soverignity with their terms and conditions.......

        How come a country which is agro based get condition from those bodies every year during budgeting time terms that kills agro sector....

        We are almost self sufficient in food production (not distribution of food or wealth that's why still hunger is there), my feeling they are not liking that....
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        Oct 9 2011: Hi Lindsay

        Thanks for the link above. I don't take it as neither a good nor a bad news (don't get me wrong please).

        If you breakdown this total debt , you will find a big portion of debt was built from loans coming in the form Military Assistance, Suppliers Credit, Technical assistance , and credit coming as food while World Bank , IMF etc all the time coming up with terms which is killer for agriculture sector of Bangladesh. Cash credit not there or very less, even if it comes , it carries strict terms & high interest. So thing is that I need money being hungry, you are lending me that money but telling me to buy only a particular JEANS when I need to have food for the day.

        Because of those terms the production cost of food shoots up but during harvesting period food price goes down (not merely due to supply demand economics but the trick of local /international food barons) , result ?
        Growers /farmers lose money and starve for certain period of year. On the other hand government took the strategy of buying food from world market during the time when it is cheaper than internal market to ensure food security (defintely as per desire of WB & IMF).

        Please check the link below

        Volatilty international food market due to reasons (speculation, bio-fuel etc) for which you started the discussion, brings challenges and push Govt in to more debt plus instability and people to hunger. That's what I feel.

        Food challenge really a complex problem , more we collect data more we look into other reasons we get into a syndrome of analysis paralysis.

        So let's focus on two issues to understand the impact of Speculation & Bio-fuel demand on food security and try to understand way out if these two really have any impact. Well that's what I feel.....

        Note : Lindsay some of the links you pasted are not working, found as I tried, please check those
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          Oct 9 2011: Salim,

          RE: Troubl ewith links

          Double checked all links and found two that didn;t work..Princeton study by Albert Deaton ( which I annotated to assist in locating) and one other..not sure the link I inserted was the one I intended and will check further..

          I appreciate your mentionsing and will double check the links as I make the posts

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          Oct 9 2011: Salim,

          Yes, seems very unfair that Bangladesh, deemed able to pay off these onerous loans to foreign governments remain bound to pay off these loans and also, perhaps more importantly, bound by their onerous terms...terms which hinder or perhaps even preclude Bangladesh from establishing its own food security..its own food self sufficiency.As you and I have discussed elsewhere, the rape of poor nations via IMF and wolrd bank "aide" happened in partnership with corrupt government officials who bound their poeple with this debt and with these honerous terms for thei own personal power and enrichment. Was this case in Bangladesh? My sense from my own immersion in the issue of speculation and food prices is that there is a growing awareness that food suffuciency food access in the poorest nations is all snarled up with three decades of exploitation in the guise of aide. That poor nations who are not food sufficient ( who depend on imports) are uniquely sensitive to this "perfect storm" of issues in global fundamentals driving prices up and speculation driving them up even further.The pont of this conversation was to focus on the connection between the food crisis in poor nations and the role of speculation in food prices in global markets .

          I think we have established in this conversation that speculation did and will continue to play a role in food prices and that the trend is to higher food prices and more speculation

          .Now, I think you are right, it is time to focus more on exactly how this played out in the world's poorest countries and how it will play out if there is not immediate relief.

          Will national commodities markets help? ( That is a popular idea right now)? Is the dedbt relief plan at all helpful? Can this help with reform in global markets?
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          Oct 9 2011: Salim,

          Will bring more links and analaysis later but see from data that Bangladesh's national debt is only 35% of GDP in comparison to the US and Canada both above 50% or Japan at 225%. So debt relief doesn't seem to be a critical issue for Bangladesh .

          In several other sources I see that Bangladesh has made food security and food adequacy a national priority for a long time and that as of the 2009 World Hunger Summit in Rome.. post food crisis Bangladesh had both adeqacy ( enough food to feed everyon ein the nation) and security ( adequate resrves while rserves were depleted or non-existent elsewhere in the world.
          Yet as of 2009 1/4 of Bangladeshi people had no access to food. In other words food aid to its own people is not part of the Bangladesh governments priorities.

          Thus it would seem that Bangladesh was not one of the nations adversely affected by rissing food prices globally or the inflationary effect of speculation on global food prices. It would not therefore benefit from any global initiave to take speculation out of offd prices.

          A Fair assessment? Do you agree?t
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        Oct 10 2011: Lindsay, thanks for your fact finding and research on my country.
        Let me focus on food issue , keeping aside debt issue for the time being.

        You see despite being close to self sufficiency in food, we have hunger , which is due very much skewed (and usual in current system) wealth distribution, unemployment , corruption etc etc to a great extent. But defintely the rising food price at global level pushes more people to hunger.

        Firstly our food market is not as controlled as like India as mentioned by Vineet. So any price hike in global market for any reason , become a valid reason for business people controling food sector to push the price up. Here comes the political factor, democratic process being interrupted repeatedly since independence in 1971 by Army Autocracy our political system converted in to a fully corrupted one. Politics is no more in the hand of politicians , it went in to the hand of money , specially balck money, which was actually very effectively done by the army dictetors. In the last two government elected through comparatively free and fair vote the members elected in parliament are actually not seasoned politicians, ruther lumpen black money holder business community. So government is undone to go against the interest of business community, result price hike of food and more people with in hunger bracket.

        Secondly though we are almost self sufficient in food , every year major portion of US loan come as Food and the price of food is settled on the basis of market, you see how price hike impacts us? Moreover according to Sen's law due to the reason of vote , when hunger start engulfing more people, govt partially try to protect to some extent using that US food ignoring buying from local growers , so local growers lose money as side effect and they also dive in to hunger for certain period.

        Moreover for edible oil we are solely import based, where the impact of bio-fuel is definite....
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          Oct 11 2011: Thanks Vineet,

          so do you think Bangladesh would benefit from the two initiatives Debra and I were discussing below:

          (1) a call to remove all non-commercial (speculative) trades from the food commodities market
          (2) switch to cash instead of food ( as canada has done for food aid) with distribution via NGO's not the government

          Looking only at India and Bangladesh so far it seem each country has its own unique history, food security/access issues..many internal factors that determine what happens to food in each country..who gets it and how much it costs.

          Is each country so unique that there are no immeditae global measures that could buffer against the coming continuing rise in food pruces and the iflating effects of speculation? Or are there global initiaves that would help. Did you see the UN FAO report calling for a removal of speculation from food commodities markets?
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    Oct 7 2011: Lindsay great words for our friend. Thank you.
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    Oct 6 2011: This is such an exciting and heartening "insider" deliberation on derivatives and food price distortion It was published at and was written September 11 by Amanda White. It is entitled "Derivatives Supervision Help In Fight For Right to Food"

    From the report:“The International Organisation of Securities Commissions (IOSCO) released principles for regulation and supervision of commodity derivatives markets last week. Effective supervision of these markets is necessary to avoid even the prospect that derivatives contribute to speculative price bubbles in commodities, which can increase the number of people driven into hunger.”

    And also this:
    While there is no doubt the rise in food prices involves a lot of moving parts – including market fundamentals such as the supply and demand for food commodities and transportation and storage costs – there is evidence to show a speculative bubble caused by commodities derivatives also played a role.

    In a September 2010 briefing note, Olivier De Schutter, UN special rapporteur on the right to food, said a number of signs indicated that a significant proportion of the price spike was due to the emergence of a speculative bubble."

    A recognition of the problems, a concern about the problem, a ray of light!!!
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    Oct 5 2011: Something which even media could not ignore !!!

    Another resource of Biofuel & Food price
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    Oct 5 2011: Hi Lindsay. I am not sure where to take this or what would be productive so I am asking. I think that we have two separate issues going here especially since the evidence that the derivatives issues and the speculation are entwined but not actually related. I wish I had the data to do a multiple regression analysis- heck even wish I had a good foundational question for one but as we do not, what direction do you want us to pursue? I am really interested in being useful here.
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      Oct 6 2011: Hi Debra,

      I was about to putthe same question to you!!!

      What is your take on what we have laid out so far?

      I think the Caimbridge model doesn't make the case pesuasively that speculation was a principal cause of rising food prices but I am not sure I feel persuaded to Bernanke's view either..that derivatives don't interefere in any way with market fundamentals and haven't doe so with food .

      What is your sense?
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      Oct 6 2011: Good Morning Debra,

      Some further thoughts on what direction and further investigation ight get all the pieces of the puzzle out on the table.

      I had tried to start a thread to collect all of our links, analysis and commentary on what the governement and insiders have had to say about the issue of derivatve imapcts on normal markets and on the economy.:

      No one replied so haven't be able to loate the several interesting insider reports I have turned up there including this one by the GAO ( U.S Genral Accounting Office) which seems to be pretty major in that it more or less acknolwdeges the price distortions of derivatives on oil and other energy stocks and also , importantly points to some oversight gaps they feel is respoinsble for allowing this to happen.: (October 19 2007)

      when we get the thread going I will take this link some quotes and analysis there .

      I think that there's a lot more EU and US insider look at the issue of speculation and commodities markets, perhaps even food in particualr and that locaiting and analysing those could be very fruitful ( at the above thread on insider positions )

      At your original thread definingg derivative and laying ou some founadtional facts and links I think it would be very fruitful to explore " trends in commodities derivatives"..I think that inqur may shed some light on thetruth about dervatives, the truth about the price distortions in food and energy.

      Are you game??

      ( Once the thread on insider studies on speculation is sestablished ( ia any addition you or others might make there) I have lots of stuff ready to post there...
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      Oct 6 2011: Hi Debra & Lindsay
      Understand the challenge you are talking about about multiple factors that is related to the probelm of HUNGER. Some of which seems seemingly not related but it is.
      Not diving further in to data, just using common sense and gut feel I see following points

      In our current Greed Based model even if there is no political or economical or technological agenda , a part of mankind will starve even when production of food is suffiecient...... so need to focus how we can resolve it considering an hypothetical situation where no other influence like Bio Fuel Demand, Speculation or Food Politics is not in to play.

      Defintely Biofuel demand & speculation in any given situation pushing some extra population below the hunger line. And these are better controllable factor then that of our GREED Based Societal Model which needs much more revolutionary and fundamental change. Preventing these two factors one of which is purely Techno-Economic (Bio-Fuel) another is Economics of Forgery (@Ted Barnes mentioned here about real estate bubble) , we can save a portion population from a starving situation.

      Let's focus on this in this thread...... does it make sense ..........or not ?
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        Oct 6 2011: Salim

        ,I obviously agree with you that hunger, its causes and solutions is the larger and more important question for all of us as global citizens and I hope we will do many other in depth collaboratives like this one at TED Conversation on this subject. Based on our experience here, I am also encouraged that all of us at TED Conversations can, as a collaborative team of citizen investigators make a meaningful contrbution to understanding these complex problems

        I think we are beginning to do that right here in this conversation

        .I think it's important to keep this conversation narrowly focused on trying to resolve this debate on whether speculation has distorted market pricing for three reasons:

        (1) if corrections are not made to take speculation out of food and hopefully oil, there will be continued volatility, instability and upward price pressure on food and we alreday know that when that happens it is the poorest who get pushed first into famine

        (2) trends data I have been looking at show increasing interst on the part of speculaors in commodities in general, including food and energy. It wasn't just a wierd little blip and temprary displacement of speculator sinto commodities as some anaylysts have is permanent. It is growing

        (3) The U.N. leaders in food rights and food adequacy, at least as of 2007 were very keen on the idea that hunger could be mitigated and food security improved through national commodities exchanges.( Africa already is doing this see: )If we don't closely scrutinize what has hapened with food in existing commodities markets their introduction in poor and developing nations, already home to a disproportionately huge percentage of the worlds poor and hungry. Could be disastrous f we don't truly understand how to kep speculation out of the picture.

        .Happy to join you though and work with you on the larger issue in a separte conversation if you and others start one.
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    Oct 4 2011: Lindsay, in the historical panorama we have to review the formal politics from US about Mexico in the xix century. I research the Jefferson period in order to investigate the instruction the president Jefferson gives to Monroe to design an strategy to dismount the feeding capabilityes from the New Spain and deform their economical status in America and derivates the power to New York (before New Amsterdam). The consecuences are tragical for Mexico. Right now they suffer an soffocation from the power from Monsanto and others (John Deere). The agricultural natural strenght from Mexico is dissarmed. All the time we can see this kind of piracy strategies from US governement.
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      Oct 3 2011: Hi Vineet,

      Thanks for joining us in the is exploration. You make many worthy points that we should all visit.

      (1) Agree completely that speculation didn't cause global hunger and fixing the commidities market won't cure global hunger. However, even market insiders acknowledge the very dramatic inflationary effect that speculation has had in food prices, completely unrelated to underlying market the real cost of producing a particular grain.

      (a) As early as April 2006, MerrillLynch estimated that speculation was causingcommodity prices to trade at 50 per cent higher than if they were based on fundamental supply and demand alone

      (b) famous businessman George Soros, in an interview with Stern Magazine published in the summer of 2008, acknowledged that speculators create the bubble that lies above everything." Their expectations, their gambling on futures help drive up prices, and their business distorts prices, which is especially true for commodities. It is like hoarding food in midst of a famine, only to make profits onrising prices. That should not be possible.” The Great Hunger Lottery: How Banking Speculation Causes Food Crisis The Wolrd Develpment Movement Oct. 10 2010

      (2) You are right that india is more isolated from the effects of speculation than many other nations. Could you tell us more about that? Rice is not included in commodities that part of the reason? Is India's food market more internal ( india feeds itself?)?

      (3) I am not an expert in global economics or food economics but what you say about the continual rise in prices and cite as causes is well supported in the what I have seen rseraching this issue of the effects of speculation on food prices. The point of the many studies on speculation and food prices is that unbridled unregulated growth of derivatives has driven prices significantly above market fundamentals .
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          Oct 5 2011: Hi Vineet

          Agree to a great extent about the self sufficiency of India with food, but it's really diificult to understand in a global economy in which India is big partner how come Indian food market remain insulated.....

          From my naive understanding if the food price outside India goes up, Indian food marchents will sell those out to get higher profit , if there is not any stirct ban on food export. If it is not even export , it will smuggled out..... clear example is Bangladesh , we are marginally self sufficient...all the time Indian grains, potatos , onions etcs are coming in my country as prices are higher here compared to India so this exodus of food from India supposed to have an definite impact on food price in India..... your thoughts will be apprecaited

          Other point being self sufficient and as per your view being insulated why India is unable to fight hunger ?
          Please check the link

          Moreover it seems in recent times India is on the brink of losing food sufficieny that it achieved in 60s & 70s

          Insulation also seems getting hurt

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          Oct 5 2011: Hi thanks for your further thoughts and information, Vineet. I afound thi sinteresting Princeton Study on food prices and poverty in India

          (if this link doesn't work go to and do a serach on 'india food prices')

          I haven't had time to fully digest it yet or explore other food price trend data in India but it would be interesting to compare food price trends in India vs the global food inndexes..there might be something instructive and important in that for all of us on this issue as India is a closed food economy and their story might tell us what is possible for food availability and affordability without the dustorting influences of esternal markets and their price distortions.Just skimming this white paper I gather that the food prices in India are much more stable and have risen less steeply than food prices in the Global food price index. is this correct?

          Also what % of people in India live in it more than the roughly 18% of the global population?

          What do you see in India's story that might instruct the world, on how to manage food..whether global food security is well served by speculation, whether humanity is well served by allowing the control of food globally to be concentrated in so few companies and prices continually rising to benefit those few companies.??

          Are there lessons for us in other closed food systems? What do they tell us?
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          Oct 6 2011: Salim,

          Thank for that link showing that Indias insulation from the adverse influence of the commidities market has not created food suffuciency or food security for the Indian people.
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          Oct 6 2011: Vineet

          ,Thanks for this further analysis of India food producion and price system. It is clear that India's insulation from MNC ( Multi National Corporations) and commodities market distortions, government food security and price protection systems have not been able to feed protect vast numbers of its people from living in hunger

          .we have already noted, the lack of investment in agricultural production is a global fundamental food issue.There is already consensus here in the conversation and in many indepedendent studies that globally, even without speculation market fundamentals were driving food prices high and that taking speculation out of global food markets will not cure hunger

          .Are you ponting us to something beyond that? Are you suggesting that the India expereience has relevance for global food markets..that food production capacuty globally i is not adequate?
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          Oct 6 2011: Hi Vineet
          Understand your point about speculators, also agree that speculation is one of the factor that pushing a portion of humankind to hunger and die starving....but defintely there are other factors....

          Your point about insulation against MNC is not specific to food industry of India. All the industries of India were insulated through government protection ,law & tax barrier for decades. After WTO things are changing. But thats not the point. Point is freedom from MNC does not make market free from internal profit sharks in a greed based economy.

          What are reasons of hunger in India when it is self sufficient in food and insulated from external stimuli and also when India is not driving bio-fuel production? Being biggest democracy of the world it seems it's going contrary to Amartya Sen's observation on famine and hunger & positive impact of democracy in reduction of hunger.......

          Please don't take me wrong, I am trying understand the reason of hunger from Indian example being unique with most of the criteria having in favor not to have any hunger......

          Is it a distribution problem , is it a problem marketing problem from the part of growers or it is something else..... would love to get insight from you.........

          Just giving a small example how internal system can push growers to hunger

          Some years back , I went outside my capital city Dhaka in a winter day, just 100 km away . Next early morning on way back , I saw numbers of farmers carrying different vegetables. I stopped and wanted to buy , one farmer agreed to sell to me if I buy his all 50 coliflowers. Asked about the price , he told in Bazar I will get 100 Taka (1.3 USD), now its up to you whatever you want to give above that.

          I gave 150 Taka , he was happy and I also felt good that I could give him a bit more money. But later I felt sad , when I realized each coliflower sells 25 Tk to 30 Tk in the capital city which is just 100 km away...........

          You see how local mechanism kills the grower
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          Oct 6 2011: Vineet, Salim

          Have you seen this really fascinating white paper on the Indian commodities market suggesting that india's attempt to provide price stability and food security through government price controls is not as efficient and effective as derivatives in "price discovery" ( ie finding the correct market price for a future delivery date given market fundamentals and trends).?

          As mentioned in my comment above to Salim ( I hadn't found this particular study then) the UN Food security/ food access people are also hot on derivatives in poor and developing nations.Is this being actively puyrused or studied by the Indian Government? What have they said ? Is there real pressure to do this? What do you see happening?
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          Oct 7 2011: @ Frans not all monsoons...

          I did is a truth that must be told..Monsanto is very much at the center of all this..their evil seed should be banned world wide
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      Oct 4 2011: Vineet,

      Your issue of inadqeaute investment in agricultural production was mentioned in the USDA study quoted at length above in a post this morning.

      I have to back track a bit, but if I am not mistaken either the USDA or the FED said that high prices and continuing high demand for food globally should serve to stimuate reinvestment in the agricultural sector. But as the Global Issues study of the 2007-2008 food crisis I think correctly notes, without some global intervention that will only push more people into hunger..push more people out of the picture of having access to adequate food and water.

      “ Some 80% of the world’s production is consumed by the wealthiest 20% of the world suggesting an inequality in resource use due to social, economic and political reasons

      The gap will only widen.See the quote in the post above from this same study on the few companies who control and dominate world food markets..obviously they are the only winners in any succesful strategy to drive world prices higher than fundamentals would otherwise take them.

      Isn't it likely that greater investment in agricultural production will not benefit the $1billion hungry or lower prices?Everywhere I have gone on this issue comes back to where you, Luigi, Salim, and others began. It takes a global initiative aimed at undoing the constraints that the IMF, World Bank have imposed on poor nations and creating a true global initiative to end hunger and poverty

      .Of course, that is not to say we shouldn't be trying to get food and other global essntials protected from speculative abuses and profiteering in the market place.. Indeed. wouldn't you agree, that taking speculation out of food is a key part of getting out from under the global corporate food monopoly.?
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        Oct 4 2011: I also agree with some things I've read here about spreading knowledge about the problem and reaching a larger audience. While a global initiative to end hunger is a noble idea, it is also a naive one. Humanity, in its current state, doesn't have the compassion for that unfortunately. Reinvesting in agriculture is a great idea for a multitude of reasons. The only way you could sell it though is through some sort of monetary gain and as a job creator. Before we can realistically work on getting food for everyone, we have to move our own morality and understanding forward.
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      Oct 4 2011: Vineet yes I agree farmers are poor and they don't understand stock market or ETF. But that doesn't mean they control the food market.

      From my country experience , farmers are even worse victims. They pay high for insecticide, pay high for seeds, fertilizer , electricity for irrigation purpose , but during harvesting season food barons create a situation ,that grain price go down at the village level (while at city level price remain almost static ) where farmers are actually puppet in the hands of those barons. Being poor farmer unable to hold the grain he produced for long to sale at a favorable price form the perspective of his/her investment. End result producers of food starve for certain period of year while food baron pockets get fatter and fatter.

      That proves food market is not controlled by producers (I would be happy like anything if farmers could control the market what they produce) rather the middlemen who are educated enough to understand stock market and capable enough to speculate.....

      What would you say about real estate boom.... which later collapsed like anything...... how much of that boom was due to the speculation.......?

      So impact of speculation can not be ignored ........... please check the article below about impact of speculation on food price
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        Oct 4 2011: Your point is valid Salim. The real estate boom and collapse though was due more to fraud and lies than it was to speculation.
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          Oct 5 2011: It's long time Ted to hear from you. Feeling great you are back with your sound insight of financial market.....which is good opportunity for me to learn.

          I feel the civilized name of fraud /lie or may be fortune telling is SPECULATION in these times
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          Oct 6 2011: systemic issues, glovally vineet? more than lack of investment inn production? are you referring to post- peak agricultural production..? to depleted soils and inadequte water sources funamentally limiting world food production globally.?
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        Oct 5 2011: Haha Salim you can be so pithy sometimes! You're right it is speculation and you are well aware of my views on that particular topic.
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          Oct 6 2011: Thanks Ted for your words. Yes I am aware that's why was missing you my friend!
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        Oct 6 2011: Saliim,

        Thank you for finding this wonderful paper exploring the impact of speculation on food prices. This paper, which does take a look a market fundamentals and long term ttrends takeakes a very close look at the 2006-=2008 impacts of speculation citing factors widely recognized evenin the USDA and Global Issues studies cited elsewhere here."The paper argues that the speculative move on commodity markets distorts prices, reinforces instability, increases market inefficiency and periodically leads to the formation of bubbles. The worst effect however is the aggravation of hunger in developing countries. The price bubble has pushed 120 million additional people into poverty. Behind the façade of pinstriped respectability lurks misery and hardship for millions of people.""

        A powerful introduction with some noteworthys stats right off the bat:

        "The FAO food price index which covers the prices of the most important food commodities showed a price increase of 71% during the 15 months between the end of 2006 and March 2008. The increase was particularly dramatic for rice and cereals where the prices sky-rocketed to a peak of 126% in this time period.
        The poor are affected the hardest. In an industrial country, the proportion of expenditure for food in a typical household budget amounts to 10% - 20 %, whereas it is between 60% and 80% in the LDCs (FAO 2008). According to a U.S. Department for Agriculture calculation, a 50% price increase on basic food leads to a mere 6% rise in expenditure for a high income country, but it amounts to 21% for a food importing country of low income (U.S. Department for Agriculture. Economic Research Service. 2008: p. 25).

        The FAO estimates that food costs of the LDCs 2008 will again increase by 37% - 40 %, after having already risen by 30% - 37% in 2007."
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        Oct 6 2011: Salim,

        Another wonderful quote from the study on speculation and food prices which you have brought ys showing by reference to rice trends, which are not a bio fuel crop, that that theinfluebceof bio fuel demand for food grains has been exaggereated by main stream economists:"When the food prices sky-rocketed in 2007, the role of speculation was mentioned as an afterthought or completely ignored by mainstream economists. Instead, mainly long-term factors such as the increase in demand and the production of biogas were made responsible for the drastic price increases. A World Bank study even claimed that agrofuels contributed a proportion of 70% to the food price increase.In a study on the food crisis, even before the food price reversal, UNCTAD pointed out that this factor could not be so important in increasing prices to more than double in such a short time period. For example, the price of rice increased by 165%between April 2007 and April 2008, and rice cannot be used for biogas, and there is no substitution of acreage in the countries where it is grown, either.
        It has become incontestably clear since the decrease in food prices from July 2008 at the latest, that neither increasing demand in the emerging economies nor agrofuel production caused the food price trend. It cannot be that the Chinese suddenly start to eat much more yoghurt only to stop again just a few months later. Neither has agrofuel cultivation risen so sharply only to decrease again just as abruptly. Short term factors, such as poor harvests, did not play a role in the price upswing either"

        I find this analysis persuasive..
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          Oct 6 2011: I am wondering if the rice futures could be obscuring the influence of biofuels simply because of the increase in demand in rice consumption. After all with the Asian nations increasing in buying power dramatically per capita consumption of rice would likely trend upward. If there was less corn that would also increase demand for rice as an alternative. These though would likely be small in comparison to speculation.
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        Oct 6 2011: Salim...and this absolutely cinches it for me..(also from the sttudy you brought us)..if the U.S. Commodities Market Supervisor says commodities are distorting pirces..well it must be really bad..and it must be

        "iThe U.S. supervisory authority very clearly speaks out against the trade in commodity derivatives. The CFTC (Commodity Futures Trading Commission) probably possesses the best expertise with respect to the US Markets, and observes that the commodity markets have begun to set the price of commodities as an asset instead of setting the price solely according to factors of supply and demand. They have therefore created price distortions, or possibly even a speculative bubble. In plain language:j. The commodity market has detached itself from the fundamental data of the economy,. commodity prices, as can be seen in the futures market, have become a source of monetary wealth accumulationl. the prices have thus become a target of speculation, this has caused the formation of a bubble, the excessive foodstuff prices, i.e. speculation has added a price bubble on top of the price increases resulting from realmarket dynamics.
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    Oct 2 2011: Cara Lindsay the "food crisis" is no more than a strategy to reduce the world population by famine and hunger as a focal point to provoque war. You can consult the Lugano Report from Susan George. Beyond the hughe amount of technical data and specialist research, the strategy is clear and is conducted by the owners of the real goods (gold, silver, oil, cooper...etc.) in the sub-soil, for example in Africa or in some places in Central America. The intelligence services are training to achieve this "wars" (tutsis vs hutus is just an example) and "clean" the place to let the explotation of the very richness from the earth. Also the famine is the second rider in the apocalypse.
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      Oct 2 2011: Hi Luigi and thanks for stopping by..I will check out the Lugano report but amd not pre disposed to the theory that there is an intentional orchestrated program to depopulate the worlds poorest nations through starvation.

      Although it dorsn't say so outright what this study and its mathmatical model say to me is that there is no intentional knowing price manipulation of food in the comdities market..seems to be more that speculation distorted futures prices in ways that weren't known or understood when sellers made their usual reference to futures in pricing food.

      And of course this study is not in any way suggesting that fixing the "pricing error" in food would end wolrd hunger. Did you see the graphs Debra Smith shared from the U.N. via link? Very interesting. Important to take note of the apparently very clear correlation between events in the commoditities market and dramatic rises in famine and hunger globally. The Caimbridge study may be over reaching in its statements about the connection beween speculation and food crises world wide but the reality of food crises wolrd wide cannot be denied..nor the trend and implications of that trend.
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      Oct 2 2011: Ah, yes..the Lugano report..a work of fiction with a lot of truth and insight. Some of what she says in the lugano report is documented in the film "Blind Spot" which points to "post peak" agricuktural production as having happened some time ago and essentially says that there is no technology ( certainly not Mionsanto's misguided genetically modified foods) that can change the fcat the world is overppulate.and not capable of sustaining more growth. The film. as i recall, assert sthat a sustainable planet requires a popluation of at least 1/3 less than we have now.

      I am not an economist but it seem sthere i sno arguement or dispute that we have reached peak agricuktural production..that we are simply capable of prodcing more food than we are already producing and in fact have undermined and are undermining our capacity globally to even sustain current food production levels.

      The Caimbridge study and the hype about it that prompted me to bring this question to TED did not speak of "post peak" agricultural production or specifically factor that into the "normal" price equlibrium in their model.
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    Oct 2 2011: Calling all mathmaticians!!!

    !I have always believed in the power of mathematics to transcend and redirect entrenched, highly polarized, often non-fact supported policy positions in the public arena. Most of my most effective advocacy used mathematical models, multivariate analyis, probability theory, operations research etc. Although math, especially mathmatical models or the "actuarial science" that governs rating in some sectors of insurance can also lie or not tell the whole truth or have defects of faulty design, mathematics can also speak a truth that is hard to ignore as many think this mathematical model has spoken in establishing a causal relationship between speculation and global food prices.

    The central bankers and big banks int hr U.S. and EU will no doubt be looking to discredit this model or ignore it as they are deeply wedded to their insistence that there is no causal relationship between food prices and speculation and don't want to open any avenues that might lead to tighter regulation and control of the burgeoning and lucrative derivatives marke.

    I invite the mathematicians in our community to take a look at the model ( which is not a model on the food crises per se..only of the causal relationship between speculation and food prices) , evaluate it, explain it to us and comment on the conclusions drawn One appendix to the report ( see link above) has technical documentatione Any volunteers?

    One question is what variables comprise "speculation" in the model and ehether that definition of speculation is food specific

    Another question is whether and how the model takes account of market fundamentals, whether it considers supply and demand of dfood in the food price index? ( this is an imoortnat one as the Fed maintains increaseds food demand and more demand for costlier foods drove the price index increase).

    Also please bring any other relevant predctive anlayltic models exploring the rise in food prices here by link with your analysis..
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      Oct 3 2011: Lindsay

      It was about hunger and economics. You don't need to have a mathematicion to see the connection.

      In Indonesia and elsewhere vast areas of rainforests and farmland are cleared by foreign investors to produce palmoil for the energyconsumption in the rich parts of the world. Local people are expropriated and displaced, not compensated and chased off of their lands.
      If the capital for investment is derived from the bubble that splashed and we call a crisis than we're all losers except the investors and the corrupt governments in those countries.
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        Oct 3 2011: Hi Frans,

        Thanks for joining our collabortaive here at TED conversations to see if we "global citizens" even as industry outsiders can come up with something useful , something the FED and industry insiders will accept and agree to to take the price pressure from speculation away from food. ( did you see the Merrill Lynch quote that there esitmate is that speculation incraeses prives by as much as 50% above market)

        There is a large group of us here at TED conversations that share and have explored together the exploitation of poor resource rich nations, often in the guise of economic delopment or the eradication of poverty. Fixing the price distortion of speculation on food will not solve or cure that and we at TED conversations must all stay on top of that and keep that in the fore.

        The more I read and the nore I see there is no question that there is a correlation between the hige swing out of housing related derivatives ( mostly credit default and interest rate swaps) and into commodities (price indexes) and the huge incraeses in world hunger:

        " high food prices led to the number of chronically malnourished people increasing by 75 million in 2007 and afurther 40 million in 2008."

        A wonderful link Debra shared from the UN showed that world hunger reached $1billion.

        The Fed and EU central banks have been told about the dangeros trend in artificial escalation of food prices for many years and justrefuse to see the impact of speculation on that. They still insist that all prices in the market place are actually connected to market fundamentals and nt to speculation.

        In other words, they have no arguement that high food prices may produced those alarming and dramatic impact son world huimnger but they refuse to beleieve that derivities in anyway infkated food prices. That's the issue.. That's the battle. That's what we are trying to shed light on here.

        A proven correlatiion could help immensely.
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          Oct 3 2011: I've looked up some pages on the subject out of thousands available.
          Everything on this issue is known and spelled out in every language.
          For the deaf no proof of sound will stand the test.
          Governing institutes are bound in with banking and corporations that have no conscience.
          Here in Europe they try to solve the inextricable knot of the Greece finance and most involved are only interested in the spoils they can make on the corpus.

          It looks like with unregulated speculation with derivatives the devil is unleashed.
          As I said before large multinationals like Monsanto are the real danger for our survival and not for those that today are without food but for us all. They destroy nature worldwide, they are responsible for the decline of bees so pollination becomes impossible, they rob people from their lands and from their food resources, they delude farmers and governments, they infiltrate on every political level and a lot more.

          The threat of terrorism is a joke if compared with the real threats that comes from these kind of policies.
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        Oct 4 2011: Frans,

        I just turned up an article by Global Issues specifically examining the causes of the 2007-2008 food crisis.. Their report takes it right back, as you , Salim. Luigi, Vineet, Rafi and other commenters here made as your first comment on my question:

        “The dominance of the richer nations and companies in the international arena has had a tremendous impact on agriculture, which, for many poor countries forms one of the main sources of income. A combination of unfair trade agreements, concentrated ownership of major food production, dominance (through control and influence in institutions such as the World Bank, IMF and the World Trade Organisation) has meant that poor countries have seen their ability to determine their own food security policies severely undermined.”

        “The expansion of industrial agri-foods crippled food production in the Global South and emptied the countryside of valuable human resources. But as long as cheap, subsidized grain from the industrial north kept flowing, the agri-foods complex grew, consolidating control of the world’s food systems in the hands of fewer and fewer grain, seed, chemical and petroleum companies.

        " Today three companies, Archer Daniels Midland, Cargill, and Bunge control the world’s grain trade. Chemical giant Monsanto controls three-fifths of seed production. Unsurprisingly, in the last quarter of 2007, even as the world food crisis was breaking, Archer Daniels Midland’s profits jumped 20%, Monsanto 45%, and Cargill 60%. Recent speculation with food commodities has created another dangerous “boom.” After buying up grains and grain futures, traders are hoarding, withholding stocks and further inflating prices”

        It adds some t what we have all already agreed, that evven if speculation is driving food prices up in a way notconnecetd to market fundamentals, changing that won't change access to food for the world's $1billion hungry.
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          Oct 4 2011: Good work, Lindsay
          It brings the tears to me eyes but that doesn't change much.
          And figures and letters are different than real life.

          I know someone that went year by year, for over 30 years to Sumatra to help establish a fishfarm over there. In his spare time he drove into the jungle without end to look for special plants or fishes.
          Then about 4 years back he did the same and saw to his horror oil palms without end were once was only jungle. He could drive for hours without seeing anything but plantations.

          Probably the soil gets exhausted and poisoned in a while which leaves only devastation less than desert.
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        Oct 5 2011: Thumbs up to you Frans!
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    Oct 2 2011: Yes! I want to work on this with you. I am not sure what I can offer but I will throw what I have into this pot of 'stone soup' which might end up nourishing us all!

    Forgive me for starting where I need to begin. That is with definitions again.

    A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.
    One of the oldest derivatives is rice futures, which have been traded on the Dojima Rice Exchange since the eighteenth century. Derivatives are broadly categorized by the relationship between the underlying asset and the derivative (e.g., forward, option, swap); the type of underlying asset (e.g., equity derivatives, foreign exchange derivatives, interest rate derivatives, commodity derivatives, or credit derivatives); the market in which they trade (e.g., exchange-traded or over-the-counter); and their pay-off profile.
    Derivatives can be used for speculating purposes ("bets") or to hedge ("insurance"). For example, a speculator may sell deep in-the-money naked calls on a stock, expecting the stock price to plummet, but exposing himself to potentially unlimited losses. Very commonly, companies buy currency forwards in order to limit losses due to fluctuations in the exchange rate of two currencies.

    From Wikipedia
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      Oct 2 2011: Debra,

      Thanks for helping to launch this TED Conversations experiment..and you start in a very good place...what a derivative is. Thank you. Understanding the debate on derivatives has to start with understanding what they are.
      Can I ask you chair..via this thread you have started the "Derivatives 101" . and make this thread a place to bring links, quotes and analysis that explain :

      (1) the primary purpose of derivatives ( a risk management tool to spread risk in global market trasnactions)

      (2) the permanence and prevalence of derivatives

      (3) the hype and rhetoric (giant speculative hairball that will end the world as we know it vs what makes our markets strong. viable and stable)

      (4) how derivatives are used in commodities ( the trading of natural resources)

      We have a month to do this and I really believe we as global citizens can offer wisdom that is not now in the picture or emerging. I think you will find this part of inquiry fascinating especially inlight of Andreas recent question on Facts and yours on what gappened to reliable investtigative journalism. I have never seen a pool of information on nay subject so dramatically polarized . Source documents such as Fed advisories and insider studies are glowing with praise..outsider commentary villifying and wanting to ban all derivatives. Obviously huge policy implications.
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        Oct 2 2011: Hi Lindsay, This has the potential to be really great. I know that many will jump in if we provide a diving board but they may not go to read the excellent article you provided. Would you consider pulling segments of the article that you think are most enlightening or provocative and pasting them here? This way you signal the directions you think might be particularly fruitful and help to structure the debate.
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          Oct 2 2011: Hi Debra,

          I did just finish reading the study and have some questions/re. servations about it I hope others will speak to it without being biased by my thoughts.

          First and most importantly the study is not suggesting any intentional market manipulation of food prices or even any targeting of food prices, per se. on the commodity market side. In fact what they are saying is that prior to the stock market crash the ethanol demand for corn was steadily and predictably driving up the food price index. After the mortgage driven crash the speculators who had been in housing drifted over into commoduties in a sort of market displacement. What the study refers to as "speculation" ( and one of my problems with it is they don't clearly lay out what they mean by that--seems to be futures pricing not tied to market equilibirum prices and trends). The market price of each element in the food index has always been set by futures but what this study seems to be saying is that futures somehow got disconnected from supply-demand realities and almost iadevertently caused the peak in food prices. That's just my first impression and pretty bold of me to say..putting my thoughts against such a distinguished panel..butfrst blush..I'd say it won't be persuasive wit Central banks because it isn't persuasive. The connection they describe seems to point more to a better pricing model for suppliers ( sellers) of food products. Their traditional pricing method was able to filter out the effect of speculation as described in the model.

          Makes me wonder if the intervention supported by this study isn't to work on themodel more o that it can guide suppliers in filtering out speculation.They use a lot of language about food crises and famine and there has been a lot of hype on that..but I am not sure they have made a solid case for change in commodities markets.
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      Oct 6 2011: Hi Debra,

      Wanted to add this wonderful "definition" of speculation from the white paper Salim has brouht to us analysing the link between speculation and food prices.:

      The economically most important form of speculation has developed in the financial sector during the past two decades. Bets are made on the future development of price differences in strategic areas such as interest rates and exchange rates or the price trends of securities (shares, private and public bonds, derivatives etc.).
      Among institutional investors - strictly speaking, they should be referred to as institutional speculators and speculation banking instead of investment banking - the search for such price differences has become extremely sophisticated and specialised: computer programmes facilitate completely automatic searches every second to detect possibilities of profiting from price differences, even of thousandths of a unit. By investing huge sums, as the institutional speculators do, exorbitant profits - or losses - can be obtained.
      Another important feature of speculation is that profits are not only possible with rising prices and rates but also when they decrease (see section 3.4.)
      Speculation creates no added value. In contrast to the real economy, gains are not sustainable or self-supporting"
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    Oct 2 2011: Reviewing the model and its presentation,Peter Timmer, Cabot Professor of Development Studies emeritus, Harvard University

    "The model highlights the perverse impact that commodity market deregulation and subsidies for bio-fuel production have had on the global food economy. Fixing these problems will be very difficult because of the substantial vested interests now represented in both arenas."

    This observation on the intractability of vested interests is why I brought this invitation to citizen inquiry to TED. The positions on derivatives are so hardened on both sides..liberals calling them the "hairball that will choke us all" and central banks of the EU and the United States touting them as indsipensible to stability and growth in global markets. We have in our community engineers, mathmeticians, policy analysts,economists, bloggers, brainstormers, idea generators of all kinds. Can we as a commnity bring a wisdom to this that can transcend the hardened global politics on both sides and offer a solution that can break the food crisis? Those games geeks did it in days..cracked a problem tat had eluded scientists and reserachers for years.