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Summary
The effect on prices of increased financial investments in commodity derivatives
markets—especially those for staple foods—has been the subject of fierce debate since
2008. Financial investments in (agricultural) commodities increased dramatically after
2004, followed by unprecedented price rises of these commodities that led to food riots
and an increase in hunger and undernourishment in developing countries, where people
spend up to 80% of their income on food.
As food prices reached new record heights in 2011, this debate flared up again. Unlike in
2008, a large number of academic studies examining the effect of financial investments
are currently available. Although the research has found mixed results, the overall
picture is that the dramatically increased financial investments in (agricultural)
commodity markets do affect prices, both in futures and in spot markets. The academic
and policy discussion focuses primarily on determining how strong and enduring this
effect is. Both farmers and food processors have asked policymakers to curb excessive
speculation. Civil society organisations have called upon financial institutions to refrain
from investing in derivatives markets for staple foods or in commodity derivatives
altogether.
In order to make an informed dialogue possible between Dutch financial institutions and
civil society organisations this report aims to provide a better understanding of the
activities of large Dutch financial institutions in the (agricultural) commodity derivatives
markets. SOMO has examined the activities in agricultural derivatives markets of the
three largest Dutch banks and three largest pension funds, covering almost 90% of the
Dutch banking sector and approximately 60% of all pension savings. With the exception
of one, all financial institutions have cooperated with SOMO in reviewing the data
collected and by providing additional information.
It turns out that all—albeit to varying degrees—are active in the commodity derivatives
markets, including those for staple foods. With investments in agricultural commodity
derivatives totalling approximately 5 billion euro, Dutch pension funds are substantial
players in the market. Especially asset manager PGGM, and its owner and main client,
pension fund PFZW, stand out with 7% of their portfolio invested in commodity futures,
compared to 2-3% for most other pension funds. Among banks, Rabobank (including
Robeco) has with a distance the biggest exposure in agricultural commodity derivatives
markets while ABN AMRO is an important actor as a provider of clearing services (no. 3
globally), with a market share of around 10% in important agricultural futures markets.
Although the discussion has continued for three years now—none of the three banks has
any publicly stated corporate social responsibility policy with regard to these activities.
The same is true for the pension funds and asset managers, with the exception of
PFZW, which put a position paper on its website during the course of this research.