Miller attacks commodities trading over possible 'havoc'

Scottish farming leaders this week joined a rising tide calling for increased controls on commodity trading to prevent financial speculators wreaking havoc in agricultural markets.

Last week, at a major agricultural conference in Paris, French President Nicolas Sarkozy indicated France wanted controls placed on the derivatives and futures markets to reduce the trading on food supplies.

At the Highland show, NFU Scotland president Nigel Miller described as "deeply alarming" the fact that the greatest proportion of activity in the futures markets no longer involved those in the supply chain but was taken up by speculators.

Hide Ad
Hide Ad

He cited the volumes traded on the Chicago wheat futures markets which are now some 46 times the annual production of wheat in the world.

Miller admitted that financial tools, such as the futures markets, assisted industry in managing volatility. Often they provided producers and those within the food chain an opportunity to hedge their risks and plan forward.

However, he said that, as the importance of food production had grown world-wide, these markets had now attracted "the unwanted attention of financial speculators" and that has been to the detriment of producers both at home and abroad.

"It is a system open to third parties who often have little interest in managing the long term risks associated with producing food but have every interest in short-term financial gain," he said.

While producers are currently enjoying high grain prices, he believed that the futures market could also accentuate any low prices and make economic life more difficult for farmers.

To avoid this happening, the union wanted to see improved regulation. "There is no harmonised regulation for these and, astonishingly, they lack a basic set of rules governing market abuses and price manipulations in some cases," he said.

The union also revealed that it had written to Europe's competition authorities over what it sees as monopolistic practices in the UK fertiliser market. Vice-president John Picken said that there was basically only one manufacturer left in the UK and a limited number of players at European or world level. The result was, according to him, that the pricing of fertiliser, both locally and globally, no longer followed competitive market rules.

He added that recent grain price increases may have encouraged some within the fertiliser trade to rewrite their price book.

Hide Ad
Hide Ad

"Once again we face the prospect of increased bills for fertiliser landing on doormats before any crops have been physically sold from the farm," he said. "That is unhelpful and in the interests of long-term relationships between farmers and suppliers, I urge that a commonsense rather than opportunistic approach to fertiliser prices be taken."

He warned that if the world was to avoid a repeat of the food crisis seen in 2007 and 2008, then the authorities must reassure themselves that the pricing of fertiliser was transparent and followed normal competitive market rules.

Related topics: