How European banks and private finance profit from food speculation and land grabs
Daniel Pentzlin introduces Farming Money, Friends of the Earth Europe's latest report that looks at how European banks and private finance profit from food speculation and land grabs.
One cause for the 2008 and 2010/11 food crises is the huge growth in financial speculation. It led to prices no longer being solely driven by supply and demand, but increasingly by the actions of financial speculators and the performance of their investments.
Companies, investment funds and sovereign wealth funds are increasingly investing in land to hedge their price risks, driving land grabs.
In January 2012, FoEE published the study “Farming Money”. It shows that a broad list of EU-based private financial institutions – banks, pension funds and insurance companies – are involved in trading or marketing investment products based on agricultural commodity futures or other agricultural commodity derivatives and complex instruments. Some of those which seem most involved are Deutsche Bank, Barclays, the Dutch pension fund ABP, the German financial services group Allianz and French banking group BNP Paribas.
A significant number of financial institutions across Europe appear to also be involved in financing land grabs directly or indirectly. Allianz has a fund that invests in Bulgarian agricultural land, Deutsche Bank has a fund that invests in Brazilian farm land, and a subsidiary of the Italian insurance group Generali has purchased land in Romania. Other financial institutions have financed agribusinesses with explicit links to land grabs and human rights abuses, notably ABP in Mozambique, AXA in India and HSBC in Uganda.
The study recommends a set of key measures to regulate EU financial markets and tighten corporate policies on financial services and investments in food commodity derivatives and land deals. In order to avoid excessive speculation influencing food prices, the de-regulation that has taken place over the last 20 years must be reversed.
Caps on the size of the bets speculators can make, so called ‘hard position limits’, are essential to tackle excessive speculation. The EU proposals must be strengthened and improved supervisory capacities must be introduced.
Private financial institutions, including banks, pension funds and investors, should liquidate their open positions in food commodity derivatives and related funds and refrain from further activities that are not directly linked to hedging for farmers, food processing companies and related commercial traders. Fund managers and financial service providers should apply strict codes of conduct on the use and sale of food commodity products and agricultural land investment, as well as respective financial services.