Food Prices, Ethics and Forms of Speculation

This paper examines the role of speculative motives in the deter- mination of commodity prices and specifically food related commodity prices. The motivation for this study is the considerable flow of funds into commodities, the widespread view that the process of financial- ization has led to greater levels of speculation and that speculation is the primary cause of regular spikes in food prices since the turn of the century. We consider two forms of speculation, a biasing influence (manipulation) and a correcting influence (speculators), relative to the fundamental price. While both forms of speculation are relevant, they are small in terms of their influence on overall prices. We do however find some evidence of an increased role being player by manipulators during the period most associated with financialization.