Deutsche Bank commodities move draws fire from campaigners

Jan 22 2013, 03:53 IST
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Food campaigners criticised Deutsche Bank for abandoning a moratorium on trading new commodities products, arguing that financial speculators continue to cause price rises for vital foods. (Reuters) Food campaigners criticised Deutsche Bank for abandoning a moratorium on trading new commodities products, arguing that financial speculators continue to cause price rises for vital foods. (Reuters)
SummaryFood campaigners criticised Deutsche Bank for abandoning a moratorium on trading new commodities products, arguing that financial speculators continue to cause price rises for vital foods.

Food campaigners criticised Deutsche Bank for abandoning a moratorium on trading new commodities products, arguing that financial speculators continue to cause price rises for vital foods.

"The biggest losers will be the poorest people on low income. They will be facing even more volatile and higher food prices", said Heidi Chow, campaigner with London-based anti-poverty group the World Development Movement (WDM).

"Anecdotal and statistical evidence that we see shows price volatility is driven by financial speculation," she said on Monday.

Deutsche Bank - which responded to controversy over the issue by declaring its moratorium in March 2012 - had said on Saturday it would keep dealing in financial derivatives linked to commodities, arguing there was no conclusive evidence to prove speculators were responsible for rising prices of agricultural products.

The bank reiterated that a review of numerous studies showed no convincing evidence that the growth of agricultural-based financial products has led to higher prices.

Thilo Hoppe, a politician with Germany's green party, said it was nonetheless irresponsible to push ahead.

"So long as Deutsche Bank cannot prove that financial instruments based on commodities don't cause a rise in food prices, they should refrain from using them," Hoppe said.

Thilo Bode, executive director of Berlin-based consumer group Foodwatch, said there were plenty of studies which concluded speculators do amplify price rises.

"Deutsche Bank did not address our concerns, and this amounts to irresponsible management," Bode said on Monday.

Deutsche Bank said it would review new products to ensure these did do not provoke price spikes.

"After a period of intense consultation and reflection, we have lifted our temporary halt on launching new exchange-traded products based on agricultural staples," the Frankfurt-based lender said.

It argued that price surges were due to growing demand triggered by population and income growth in developing countries, while supply was limited by water scarcity, climate change, lack of infrastructure and harvest waste.

Proponents of commodity-linked derivatives also argue they help farmers gauge prices and allow food producers and processors to hedge against fluctuating prices.

Yet the WDM rejected the argument that more financial players were better for the market.

ASSET CLASS

"They are not making decisions based on the underlying supply and demand of food, but may be using commodities to hedge other assets in their portfolio," Chow said. "Smaller farmers in developing markets don't have access to these markets."

She points to her organisation's own research which it says shows how financial speculation has boomed in recent years, turning commodity derivatives

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