The financialization of agricultural commodities: implications for food security

Abstract

This chapter outlines the ways in which financialization affects food systems and food security. It makes the case that the growing prominence of financial actors, institutions and motives in food systems creates dynamics that prioritize financial profits over other goals, including those related to food security. These developments can lead to excessive speculation in commodities futures markets that drive food prices higher, which has a disproportionate impact on the world’s poorest and most vulnerable populations. High levels of speculative trading in commodities futures markets has been implicated in the 2007-12 food price crisis, which saw food prices spike and an associated rise in world hunger. Similar dynamics are playing out in response to the war in Ukraine, and food prices have reached new highs. Heightened financialization in food systems is largely the product of a weakening of regulatory measures that govern commodity futures markets. The chapter concludes that stronger regulatory measures are required to rein in excessive speculation on agricultural commodities, thereby mitigating market dynamics that compromise food security.