Meddling in markets is something the European Union does well.
And as if the Commission didn’t have enough on its plate with the reform of the Common Fisheries Policy (CFP) and Common Agricultural Policy (CAP), it recently decided to tackle commodity speculation, which some blame for rising food prices. This month, the Parliament and Council agreed new rules to govern commodity derivatives linked to products such as wheat, soyabeans and sugar.
The news has been welcomed by NGOs, some of whom blame the banks such as Goldman Sachs for “rapid and unpredictable swings in food prices”.
But things are never quite that simple.
As our analysis explains, speculators are a farmers’ best friend and play a crucial role in guiding their future cropping decisions.
EU ‘meddling’, they say, could have unforeseen consequences for the food chain and ironically, instead of harnessing food price inflation, farmers warn that EU bureaucrats could be paving the way for a very bumpy ride.
Copa-Cogeca, which represents farmers in Europe, for example, welcomes the EU agreement as a “step forward”. But, it says, prevention is better than cure. “The best way to avoid food speculation and extreme volatility on the agricultural commodity markets, is to produce more. We need convergence between physical and financial markets. Farmers need direct access to futures markets so that they can hedge against risks. More transparency on the market is also vital,” a spokeswoman says.
Instead of chasing bankers, perhaps the EU’s first priority should be to ensure the smooth transition of a workable CFP and CAP to lay the foundations for increased production.
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