I. The German Bundestag notes:

Food prices have risen massively in recent years and are also subject to drastic fluctuations. The increase in the price of staple foods such as rice and cereals has been particularly dramatic, rising by 126 per cent between the end of 2006 and March 2008. After a temporary slump, the prices of staple foods are now heading for a record high. People in the least developed countries (LDCs) are particularly hard hit by the price rises: while spending on food in industrialised countries accounts for between 10 and 20 per cent of household spending, the comparable figure in the LDCs is 60 to 80 per cent.

As a result of the price rises, the number of people living in extreme poverty rose by between 130 to 150 million to over 960 million between 2007 and 2008, according to World Bank estimates. The excessive prices in the food sector present a direct threat to food security and to the human right to food. Many countries in the Global South are net food importers. The increase in the price of food imports there is leading to higher debt levels and an increasing risk of inflation. On the other hand, farming, particularly in the countries of the South, is an important source of income. Farmers depend for their livelihoods on fair, reliable prices. The planning uncertainty caused by price volatility is, moreover, preventing necessary investment. For similar reasons, extreme fluctuations are also causing problems for agricultural production in the countries of the North, too.

The rises and fluctuations in food prices have complex causes. Speculation in agricultural commodities derivatives has led to extreme and unpredictable fluctuations. The use of agricultural commodities for investment purposes has also encouraged the upward trend in prices and increased the danger of the formation of speculative bubbles. In April 2008, the Federal Ministry for Economic Cooperation and Development (BMZ) issued the following statement: "The international capital markets, on the search for lucrative and relatively future-proof investment possibilities, have once again turned their attention to the agricultural markets. This is creating more volatility, particularly when speculators enter the market." Experts at the World Bank calculated in 2008 that around 37% of the rise in food prices was due to speculation. The chief economist of the United Nations Conference on Trade and Development (UNCTAD), Heiner Flassbeck, believes the figure is even twice as high.

The primary trigger for these drastic developments was the liberalisation of the financial markets. The volume of futures trading (tradeable contracts to buy or sell a specified asset on a particular date) outstripped real cereal production in the USA by 11 times in 2002; in 2004 this figure had risen to 16 times and in 2007 to 30 times. Particularly during the credit and financial crisis of 2007/08, institutional investors such as pension funds, investment banks and hedge funds, looking for profits in the commodity markets, flocked in greater numbers to the agricultural commodities markets. Deutsche Bank, which alongside the US banks, Goldman Sachs and Merrill Lynch, is very active in the commodities sector, writes in its Annual Report 2009: "key investment areas – commodities trading (...) turned in record years". In 2009, Goldman Sachs made a profit of five billion dollars on commodities derivatives alone, including to an increasing extent agricultural commodities derivatives.

The Federal Government has repeatedly endorsed the Millennium Development Goals, most recently in September at the Millennium Summit in New York. The first and foremost goal is to halve the number of people in the world suffering from extreme poverty and hunger. The deregulation policy of previous governments and the unwillingness of the current governing coalition to impose strict regulation on the financial markets are in direct opposition to this declared goal. In September 2010, the responsible working group of the Food and Agriculture Organization of the United Nations (FAO) stated unequivocally: "Over 150 years of futures trading history demonstrates that position limits are necessary in commodities of finite supply to curb excessive speculation and hoarding". At the end of November 2010, UNCTAD called, among other things, for tax measures to limit speculation in commodities markets. The Federal Government must act without delay – for example by bringing influence to bear on the revision of the Markets in Financial Instruments Directive (MiFID) and the Market Abuse Directive (MAD), as well as the Regulation on OTC Derivatives (over-the-counter derivatives, i.e. derivatives traded outside the stock exchange). It is not enough, however, simply to make speculation more difficult. In the medium term, there is a need to decouple the production of and trade in agricultural commodities entirely from the financial markets and instead to regulate them politically on the basis of international agreements and in the interest of food security and sovereignty. Furthermore, there is a need to prevent speculation in agricultural land worldwide in order not to jeopardise the bases of food production.

II. The German Bundestag calls on the Federal Government

1) to introduce measures at national, EU and international level to stop agricultural commodities speculation and to limit commodity futures trading to what is needed for the purposes of price hedging.

This includes:

a. strictly regulating agricultural markets by standardising derivatives contracts, introducing position limits for individual traders and the total volume of contracts per commodity (aggregate position limits), as well as upper limits on the physical acquisition and ownership of agricultural commodities by non-governmental companies or private individuals, and establishing control bodies and real-time disclosure obligations, including reporting obligations;

b. banning OTC trading in agricultural derivatives;

c. setting up a European commodity futures trading supervisory body, similar to the U.S. Commodity Futures Trading Commission (CTFC), specialising in agricultural commodities, and giving it powers to intervene to prevent market abuse and extreme market situations;

d. introducing a register of traders to include all actors trading in agricultural commodity derivatives. Actors who are involved in production, processing and sales would be permitted to enter their names on the register. Registration would not be permitted to index funds;

e. increasing the securities underlying agricultural commodity derivatives and driving forward the introduction of a financial transactions tax;

f. accelerating the setting up of governmental, internationally coordinated and controlled reserves of physical foodstuffs to respond to the volatility of the agricultural markets and to make it possible to react to food crises;

g. imposing conditions in international negotiations to prevent government-sponsored speculation.

2) to take steps at national, EU and international level to

1. ensure the introduction of medium-term statutory price corridors which would avoid the need to resort to futures trading to hedge prices;
2. ensure coordination and supervision of the agricultural commodities sector under the aegis of the UN, e.g. UNCTAD, to promote food security;
3. effectively limit the concentration of power in agricultural markets.

Berlin, 24 February 2010

Dr Gregor Gysi and parliamentary group