World Food Day Action: CFTC Should Regulate Commodities Trading
We sit on another potential derivatives bubble. But instead of the housing market being turned into a casino and resulting in millions losing their homes, this time it's agricultural derivatives with the looming risk of global food shortages and famine.
While the current protests in the U.S. have rightfully centered on the banks’ role in causing housing foreclosures, unemployment and economic injustice, people around the world have felt the effects of excessive speculation on Wall Street most directly in the prices they pay for their food and energy. One might think farmers would benefit from higher food prices, but farmers all over the world are hit just as hard because everything that goes into growing our food is more expensive.
Food price volatility is a matter of life and death. Right now, the Commodities Futures Trading Commission (CFTC) has the important task, mandated by Congress as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, to enact strong limits on agricultural derivatives. If the position limits are strong enough, stability would be brought back to these markets resulting in less volatile prices that would help secure our global food system. The Occupy Wall Street rallies have galvanized public attention around the clear need for stronger financial regulations that will help secure our financial system.
Here is one meaningful action you can take to help commemorate World Food Day on October 16th: send a letter to the members of the CFTC requesting that they impose stricter regulations on food commodities traded on exchanges and stop gambling on hunger.
Visit www.StopGamblingonHunger.org for more information
In the United States, one in six children is food insecure. Globally, estimates are topping nearly one billion people, or one in seven, who suffer from hunger. In addition, poor people spend upwards of 75% of their income on food, according to a World Bank Report, so rising food prices hit them the hardest.
You have been tasked with establishing position limits for commodities. Originally, the agricultural futures markets, including derivatives, were intended to help food producers, processors and end users price their products as well as offer an insurance against massive losses. In 2000, the Commodity Futures Modernization Act eliminated many safeguards. In addition, new players who have no direct interest in these food markets were allowed to bet on the price of food. Today, after a decade of deregulation, there is evidence that increased speculation is linked to higher prices of the actual food we purchase.
The Wall Street Reform and Consumer Protection Act mandates stronger financial regulation. By establishing strict position limits so that there is a cap to the size of bets as well as a limit to the number of bets one trader can make, you will eliminate the excessive, damaging speculation that exists today. Clear positions limits provide regulatory certainty and encourage stable derivatives markets for the benefit of farmers and consumers.
Food price volatility is a matter of life and death. Please support strict regulations on agricultural commodities.