A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
Focus on issues

When speculators impair a changing market



Bernard Keppenne (CBC Banque) and Antonio Gambini (CNCD),


Défis Sud (SOS Faim)



In a context of liberalization and deregulation, the growing financialization of agricultural markets has, for the past decade, gone hand in hand with increased speculative practices, whose multiplier effects on price volatility are factual and challenging. In such detrimental environment, an increasing number of experts are recognizing the intrinsic failure of agricultural markets.

We highly recommend the joint interview by Bernard Keppenne, Chief Economist with CBC Banque1, and Antonio Gambini, Development Finance Officer at CNCD2, in the bimonthly magazine Défis Sud published by SOS Faim3, a Belgium- and Luxembourg-based NGO. We are publishing below extracts from the article.

The two specialists cover the growing financialization of agricultural market and its impact on the agricultural commodity markets subjected to speculative practices. Consequently, classical economic fundamentals can no longer follow the complexity of the worldwide agricultural trade in a globalized environment where agriculture has become a risky business.

Two profiles, two professional experiences and yet the same observation: Regulating agricultural markets––and more generally financial markets––is a must to fight price volatility, and ultimately keep agriculture going and safeguard global food security.

momagri welcomes these conclusions. In fact, our movement has, since the early 2000s, been committed to promoting global agricultural market regulation, at a time when market stability assumes a key strategic character. As far as Europe is concerned, momagri is considering the possibility of another Common Agricultural Policy that will precisely adopt new regulatory market mechanisms, so that it can meet the many challenges it is confronted to.


momagri Editorial Board






Ever since 2007 and 2008, agricultural commodity markets have been posting an upward trend, thus posing supply problems for net importing nations. Speculation is supposed to be driving the upward trend. But is it really the primary factor?

At any rate, our lecturers share this analysis: The structural changes of agricultural markets explain the price upward trend, and speculation dramatically amplifies them.


We must regulate markets.

“Sure enough, we have a medium- and long-term structural upward trend,” indicates Antonio Gambini. “But the impact of speculation cannot be denied. It has, in this respect, radically altered the situation. Speculators––mostly financial players–– manipulate the upward trend. The portion of ‘specialists’ [editors’ note: players who effectively trade commodities, in opposition to totally financial players] active in markets is increasingly declining to the profit of purely financial generalists.”


Tangible and virtual markets

The figures quoted by Bernard Keppenne support this imbalance between trade volumes and actual agricultural output. “In 2010 for instance, the virtual wheat trade was eight times higher than actual production, and for corn, the spread was fifteen to one! Purchase positions––that are actual trade transactions––only represented 15 percent of all financial volumes for wheat, and 20 percent for corn and soybean. As far as volumes subject to transactions, only 15 to 20 percent are still concerning actual commodity trades.”

So between 2003 and 2008, “the volume of speculation on index funds increased by 1,900 percent” states Antonio Gambini. “In the same period, these funds’ total assets rose to $317 billion from 13 billion. During that span, we had the 2008 spike with price increases of about 200 percent for some agricultural commodities––rice, corn and wheat. This represents a speculative bubble. The same thing occurred in 2011. This is a typical bubble occurrence.”


Who profits?

While this lasting agricultural price upward trend is harmful to buyers and consumers, it would seem, a priori, to be a good thing for farmers.

“Indeed. For producers, rising prices are not a concern” feels Bernard Keppenne.

“Confronted to a 20 percent lasting upward trend for output prices over 20 years, they can really anticipate. Today, their problem is price volatility: Farmers are unable to foresee price changes, and consequently face the huge challenge to plan for their activities.” Across the world, farmers’ biggest challenge today might thus be to thwart price volatile changes.

An opinion that is not shared by Antonio Gambini as he takes a look at what is happening in the South.

“Most of the agricultural output of developing countries is not intended for international markets, it supplies domestic circuits. When it is actually intended for international markets, these are very often multinational agri-business corporations or still long reliable landowners––as in South America––that can benefit from these increases. Moreover and unfortunately, many developing countries are net importers. Consequently, they are always on the losing side.”

In addition, even looking beyond volatility, the price upward trend experienced during the past few years leads to a speculative bubble. And as explains Gambini, “a bubble swells and then bursts, without ensuring stability” on the medium- or long-term.


Two strategies

For Antonio Gambini, the first priority is to regulate speculation and the role of financial markets in relation to agricultural commodity markets. “Resolving speculation will not by itself bring about a solution to the global agricultural crisis, which is a change of fundamentals, as we mentioned above. But in spite of doing all we can to improve global agricultural markets, we will not reach tenable results if we let billions of dollars wandering in markets, and causing incredible damages.”

Bernard Keppenne feels that the strategy to be adopted includes the general regulation of financial markets––whether agricultural commodity derivatives or others––and the organization of physical markets.


Regulated stock markets and position limits

“We have numerous OTC markets without any possibility of control,” laments Bernard Keppenne. In organized markets, one could set limits. In OTC markets, every thing goes between players.” Indeed, Antonio Gambini admits that today “the paradox is that equity markets appear to be very regulated realities and thus progressive entities. And this for the simple reason that there is worse: the OTC markets. Bringing back these trade volumes to a stock market would currently be an improvement. Today, confronted to speculation, the stock exchange is working!”

“Thought-provoking proposals in the field of market regulation aim at implementing position limits,” explains Bernard Keppenne. “This means that operators could no longer hold positions that lead to market malfunctions, thanks to limits that are specific to each operator.

Such limits would be tailored to each market and each commodity. In addition, they would evolve. One last item: We must implement controlling entities that are able to set these limits, follow them up and adapt them to commodity variations.”

To minimize this risk, Bernard Keppenne advocates a system that would only authorize financial positions by operators holding physical positions in commodity markets, and seeking to cover their transaction risks.

Antonio Gambini for his part does not envision the criterion to be used to differentiate a purely speculative transaction from a risk coverage transaction. Accordingly, he tends to “support identical regulation for all players. Even if it means providing free access to agricultural commodity markets to certain types of players, based on required accreditations.

To fight volatility, Bernard Keppenne touches up on another avenue, also instigated by the American economist Milton Friedman–– “setting fluctuation margins for all financial assets, within which we could operate by setting margins for each asset. With control instruments to ensure that such margins are obeyed.”

Yet, the economist underlines the difficulties of such a system at the outset: Setting the limits to be placed and having the means to intervene, therefore retaining a regulatory entity.


Stock exchange or agri-business?

A quasi “existential” issue remains: Are exchanges and OTC markets the best or the sole method to finance agriculture by curtailing uncertainties linked to price volatility?

For Bernard Keppenne, “at this level, cooperative enterprises must play a role. Another approach would be reducing the circuits between farmers and consumers. For his part, Antonio Gambini considers that, in the face of such pressing situation, “the strategic priority is not addressing this issue, but at least seeking the introduction of quantitative limits to speculative amounts that can enter markets. Not only this is possible but also required when one considers the millions of households condemned to misery and under-nutrition because of the consequences of speculative bubbles on food commodities. It is possible to act now at this level and it must be done.”


1 The self-governing francophone wing of the Groupe KBC, a result of the merger between Crédit Général and the Cera Banque, active in Belgian agricultural activities.
2 The Belgian francophone platform for development NGOs.
3 The full interview is available on the SOS Faim website or at: http://www.sosfaim.org/developpement-rural-FR-publications-defis_sud-speculation_volatilite_prix_faire_du_ble_sans_toucher_sac_de_ble.htm
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Paris, 19 December 2018