UN food rights expert urges trading regulation
The UN expert on food rights on Tuesday urged regulation of agriculture commodities trading to stop a speculative bubble that is artificially helping to drive up food prices.
Olivier De Schutter, the UN special rapporteur on the right to food, warned that the situation may be amplified by high oil prices.
"There is a very close correlation between the price of oil and the price of food, so I fear that the next few months will be extremely difficult," he told journalists.
De Schutter argued that the advent of hedge funds and pensions funds through commodity market indices had skewed agricultural commodity trading, making markets volatile and increasingly detaching them from the physical state of food supply and demand.
"It is now resulting in a speculative bubble that is artificially inflating the price of food commodities," De Schutter explained.
He suggested that regulation should deal with speculative institutional investors and transparency rather than commercial traders who have traditionally needed to hedge their harvest acquisitions against price shifts.
"I welcome in this respect the initiatives taken by the French presidency of the G20 although I acknowledge that it is facing lots of resistance from a number of governments," he told journalists.
"I am worried, I believe this should be regulated, I believe that a clear distinction should be made."
World Bank president Robert Zoellick warned finance ministers of the leading G20 economies last month that the world is reaching a danger point where soaring food prices threaten further political instability.
Apart from the artificial volatility, Zoellick also pointed to increased demand from emerging markets and severe weather that has reduced the ability of farmers to respond.
France, which currently holds the presidency of the Group of 20 top developing and developed countries, has made reducing price volatility in basic commodities including food one of its key goals.
© 2011 AFP