20.01.2012

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For a long time, speculators only played a minor role on the commodities markets.

The vast majority of traders made use of the commodity futures exchange to safeguard themselves against price risks in trading grain in the real world – to hedge their bets. This is precisely what the “Chicago Board of Trade” was founded for by producers, buyers and sellers in the USA in 1848. This was the birth of the largest grain exchange in the world. But things have changed. In the early 1990s, the USA started to liberalise financial regulations. The market underwent a fundamental change. Whereas speculators held only 23 percent of ongoing contracts in 1998, they were in possession of a staggering 69 percent by 2008. 

Today, it is the logic of the financial market that governs the grain markets. Experts refer to the “financialisation” of the grain and commodities markets. The result is that the intensity and frequency of price spikes and dips is increasing. Banks and pension and hedge funds are speculating with the world’s bread, and in betting on rising prices, they are accepting the hunger that threatens millions of people who are unable to protect themselves. However, the producers, buyers and sellers of grain are also beginning to feel the downside of the “boom” in the USA. It was not without reason that a re-regulation of trading in commodity derivatives was introduced politically for grain and energy in the USA in the summer of 2010, too. 

The “danger” of regulation is bringing all those into the arena who are benefiting from liberalised commodities futures exchanges: the banks, which are forever introducing new finance products to the market and luring investors with good prospects of profits; the institutional investors, who want to diversify their portfolio and benefit from rising food prices; the stock exchanges, whose income increases as more and more futures contracts are traded; and the international grain corporations, which are not only safeguarding themselves on the commodities futures exchanges but are also making considerable profits through financial betting. 

The finance industry is making an all-out bid to prevent reasonable regulation.

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