What is food speculation?
The buying and selling of futures contracts by traders with the aim of profiting from changes in food prices. Food speculation can be both positive and negative for food producers and buyers.
Where have you heard about food speculation?
It’s often referred to in discussions about global food prices. Some organisations feel that excessive food speculation can make the market more volatile and have campaigned for greater regulation.
What you need to know about food speculation...
A futures contract allows a food producer to sell their goods at a future date for a guaranteed price. This is a form of hedging and can help farmers protect themselves against risks.
Food speculators buy and sell futures contracts and seek to profit from the change in prices of agricultural goods. Some experts argue that excessive speculation can distort the market so that food prices are no longer just based on supply and demand.
Food speculation is widely considered to have been a contributing factor to the 2007–08 world food price crisis. Regulations to limit food speculation have since been tightened in both the US and EU.
Find out more about food speculation...
Find out more about the futures contracts that underpin food speculation in our definition.