Food Prices, Ethics and Forms of Speculation

This paper examines the role of speculative motives in the determination of commodity prices and specifically food related commodity prices. The motivation for this study is the considerable flow of funds into commodities, the widespread view that the process of financialization has led to greater levels of speculation and that speculation is the primary cause of regular spikes in food prices since the turn of the century. We consider two forms of short-term trading, a biasing influence (Manipulators) and a correcting influence (Speculators), relative to the fundamental price. While both forms of short-term trading are relevant, they are small in terms of their influence on overall prices. We do however find some evidence of an increased role being played by Manipulators during the period most associated with financialization.