Raw Materials & Resources

POSTED 08.13.13
What’s that got to do with the price of beans?

Blame for rising food prices placed on ag-based financial products

A report from Oxfam, an international confederation of organizations working to find solutions to poverty and related injustice, is sending shock waves across the fund management industry. The report accuses banks trading agricultural commodities of “speculating on hunger.”

Oxfam’s research begs the question, does investment in ETFs or standard open-ended funds offering exposure to agricultural commodities actually push up food prices?  

While up for debate, Deutsche Bank, one of Germany’s biggest commodity traders, refuses to back away from exposure to agricultural commodities. Contrary to the speculation, new findings from the bank indicate that the growth of agricultural-based financial products has not pushed food prices higher in recent years.

“The vast majority of studies agree that the fundamental cause of rising food prices is sharply rising demand that is not yet matched by supply,” according to the Deutsche Bank’s research. Demand is surging because of population and income growth in developing countries while production is limited by water scarcity, climate change, lack of infrastructure and harvest waste.”

The bank’s research estimates that more than $80 billion of investment is necessary to properly boost farming productivity and meet rising food demand. The bank’s working group went on to note that “without significant investments in agriculture, rising prices will become a permanent fixture … We need to support these investment needs.” (Source: Financial Times)


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