Investor Coup Causes Scare in Agriculture
Traders Call for More Transparency
The Chocolate market is jittery after businessman Anthony Ward purchased futures contracts for the delivery of over 241,000 tons of Cocoa representing 7% of the World’s annual production (Speculators Rediscover Agricultural Commodities; accessed July 29). With the effects of the financial crisis still fresh in people’s minds; chocolate industry players are concerned that one individual is holding the key to Cocoa prices. The London International Financial Futures and Options Exchange (LIFFE) is under pressure.
Farmers from third world countries will find the dispute over Cocoa price turbulence very scary. For years, the main worry has been how to deal with unpredictable weather, pests, poor farm inputs and markets. Speculators are a new addition to threats facing the farming community. When developed nations drummed up the wave for biofuel; increased food prices sparked riots across the world. Farmers (like any other business) also respond to market demand and focus on where the money is.
As investors push farmers into the infamous Roman gladiatorial corner on issues of competition between food and biofuel; the likely outcome will be an aggressive search for underutilized land. This calls for more transparency in commodities trade and matters of land leases. Financing institutions ought to seize this momentum to support farmers in developing countries to increase their productivity.
