Speculation rages over food

Speculation rages over food

Financial speculation hides behind the war in Ukraine. Certainly, and beware of the fake news artfully conveyed nowadays by speculators, brokers, politicians and all those with an interest in changing the supply and demand system and influencing the prices of agri-food products. And who cleverly forget the effects of the climate crisis on production.

For example, the Italian agri-food sector is not in crisis because of the war. Because the effects of the conflict on this sector are limited for us to certain raw materials that our country imports from Eastern Europe, in particular corn and sunflower oil. The only sector that will have direct repercussions is the livestock sector, a major consumer of maize: in the EU, 70% of raw materials for animal feed (including maize) are of non-EU origin. . Also in Italy, the majority (more than 80%) of maize is intended for zootechnical use and only the rest is used for other purposes. The WWF explains in a document called Food4Future: ” In addition to the loss of Ukrainian maize (from which almost half of the maize imported into Europe and 13% of that imported into Italy comes), the blocking of maize exports from Hungary was also announced to protect domestic demand, but also to financial reasons. speculation related to rising prices on the world market. Hungary with around 35% is Italy’s main maize supplier. Italian corn imports represent just under 50% of domestic demand, which has been increasing for several years due to the collapse of corn acreage in Italy. Indeed, Italian farmers have stopped producing maize for the livestock sector due to its low price on the market, preferring other crops capable of guaranteeing higher incomes. The result of these choices, dictated solely by the logic of maximum profit, is the loss of self-sufficiency in corn production in Italy, reduced in a decade to 50% of the total need. The sunflower oil sector (preserves, pastries, sauces, fried foods) will also suffer from the effects of the war, as Ukraine holds 60% of production and at least 75% of world exports and is the main producer of sunflower in the world. However, sunflower oil can be replaced by other vegetable oils available on the market”.

So will we have less wheat and grain because of the war? Again the answer is no. Because Italy imports only 5% of its wheat needs from Ukraine, a quota that can be met by importing it from other EU member states that have a surplus. The real problem for Italy is given by the serious drought that is affecting our country and which will have repercussions on the harvest this summer. Again the document of the WWF: “The increase in the cost of durum wheat and soft wheat continued well before the conflict in Ukraine and is caused on the one hand by financial speculation and on the other hand by the reduction in production in Canada, a consequence of the drought that hit North America in the 2020-21 season.



Does financial speculation affect the production of agri-food raw materials?

The answer is yes, again according to what Food4Future reports: one of the possible causes of the crisis in the agri-food sector, determined by the rise in the prices of raw materials, as well as fuels and synthetic chemical fertilizers, is certainly to be identified in financial speculation. There is a substantial difference in the logic of action of traditional commercial operators compared to financial operators. The former make their decisions to buy and sell “futures” (contracts which establish a commitment by the contracting parties to sell and buy a certain quantity of commodity at a future date for a fixed price) mainly on the basis of forecasts production levels of agricultural raw materials, based on the evolution of demand and information relating to the size of existing reserves. Financial operators, for their part, are guided by logics independent of agricultural production levels, exclusively following intentions to sell or buy securities in the short or very short term. An increase in the value of “futures” causes those who own them to delay their sale so that they can make greater income in the future through the increase in prices. The overall result is that prices rise more as supply falls and demand rises, regardless of actual agricultural production, solely due to the buying and selling strategies of the securities. This creates speculative bubbles where the evolution of commodity prices does not reflect the real trends in agricultural production, but follows the transactions of related financial securities.

Are conventional agriculture lobbies exploiting the war crisis?

Again the answer is yes.: Because the agricultural associations at European and national level use the difficulties linked to the war in Ukraine, amplify them, without real objective reasons supported by data which demonstrate the risk of a real food crisis in our country and in Europe. The aim is to put pressure on policy makers to cancel or reduce the environmental standards of the new Common Agricultural Policy (CAP) and the objectives of the two strategies of the EU Green Deal, “From farm to table” and “Biodiversity 2030”. These two EU strategies foresee, by 2030, a 50% reduction in the use of pesticides and antibiotics, a 20% reduction in the use of synthetic chemical fertilizers, an increase of up to 25 % – at European level – of agricultural area used (UAA) for organic farming and the creation of nature conservation areas in 10% of agricultural areas. These are all objectives that impact the economic interests of agro-industry, linked to the production of pesticides and chemical fertilizers, as well as to intensive agricultural production in general. For this reason, the powerful agricultural lobbies have tried to hinder these European strategies since their official presentation on May 20, 2020, managing to condition the recent reform of the CAP, thus avoiding making these environmental objectives binding on the Member States. However, the new CAP contains some important innovations, useful for the implementation of the two EU strategies, in particular the obligation to rotate crops and the obligation to allocate at least 4% of the areas used for land arable to nature conservation, but only for companies that have an UAA greater than 10 hectares. The war in Ukraine provided an opportunity to call for the removal of these environmental regulations from the CAP.

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