|Drought-decimated wheat, Black Earth belt|
I would not go so far as to say that regulation is needed, but that the issue needs to be looked at. We need to examine how futures markets contribute or not to price volatility.
The FAOs Committee on Commodity Problems last month put unexpected price hikes and volatility on the CFS agenda, pinpointing them as key threats to food security. Some academic experts argue that underlying issues of excessive food dependency and land-grabbing also need to be addressed.
The summer food price spikes were caused by local production shortfalls, most notably in Russia, national policy responses such as export bans, and speculative behaviour on markets, Hallam said. They did not properly reflect market fundamentals.
Over the summer, people were asking whether we are embarking on another crisis such as in 2007. The answer is no. The fundamentals are stronger.
The FAO projects that global cereal production in 2010 will be 1% lower than last year and still the third-largest on record.
Maximo Torrero, director (markets, trade and institutions) at the International Food Policy Research Institution in Washington, said that excessively volatile markets meant that any supply choke can create a significant response.
Futures market regulations should be tightened, he argued. Stricter speculative limits should be imposed; existing position limit waivers for index traders should be phased out; additional restrictions should be imposed on index traders, their activity in other agricultural markets investigated and data collection on index trading strengthened.
An international system for reporting the level of food commodity reserves is needed, and an intelligence unit that monitors reserves and price abnormalities.
Torero argued that a physical, public, globally managed grain reserve should be developed. Determining optimum stock is a politically loaded issue that would have to be resolved, and methods found for sharing costs, he pointed out.
Tony Weis, author of The Global Food Economy, argued that both the 2007-08 food crisis and this summers price hikes had exposed a fundamental flaw in the idea that food security could be left to international markets.
Greater attention needs to be paid to the idea of food sovereignty championed by Via Campesina, the international peasant movement, he told Emerging Markets.
Food shortages in the Sahel, and in Pakistan, this year showed that more nationally-oriented agricultural policies have a role to play although climate change will be a significant complicating factor.
Weis, assistant professor at the University of Western Ontario, added that a big threat is posed to the poorest peoples food security by a global surge of land-grabbing, particularly related to rising bio-fuels production.