Food speculation by global players like banks, hedge funds or pension funds is alleged to cause price swings in staple foods such as wheat, maize and soy – even though too large price swings in an idealized economy are theoretically ruled out: Adam Smith in 1776 reasoned that the only way to make money from commodities trading is by buying low and selling high, which has the effect of smoothing out price swings and mitigating shortages.
[8] This has caused price fluctuations which are not strongly related to the actual supply of food, according to the United Nations.
The result of this financialization of the commodities market is that the prices of the products respond increasingly to a purely speculative logic.
[8] Some experts have said that speculation has merely aggravated other factors, such as climate change, competition with bio-fuels and overall rising demand.
[8] However, some such as Jayati Ghosh, professor of economics at Jawaharlal Nehru University in New Delhi, have pointed out that prices have increased irrespective of supply and demand issues: Ghosh points to world wheat prices, which doubled in the period from June to December 2010, despite there being no fall in global supply.