The role of financial speculation in the rise in food prices from 2007 to 2014: an empirical approach
Keywords:
food crisis, agricultural commodities derivatives, financial speculation, rising food prices, financial marketsAbstract
This paper aims to contribute to the debate on the rise in food prices that began in 2007, arguing that
derivative speculation of agricultural commodities was a central cause. The argument begins by tracing and
examining the changes in supply and demand to see how much they can explain the rise. Once identified
the fundamentals that are relevant as causes, bad harvests and biofuel production, and having found that
these cannot account for the whole rise in prices, the role played by financial derivatives speculation is
exposed. The functioning of this type of trading is developed, showing how it inflated a financial bubble and
influenced the spot markets, raising the price of food. The exact way in which it influenced starts with a
context of financial liberalization, was encouraged by different participants that joined the speculation with
derivatives, and ultimately consisted in a change in the expectations of food producers and distributors.
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