Commodity speculation

Speculation on commodities futures markets

Nature

Commodity speculation may be undertaken through the buying, holding and reselling of physical commodities or through the buying and selling of commodity futures contracts - not the commodity itself. Speculators hope to make profits by anticipating price movements. If they expect the price of a commodity to go higher they buy futures contracts, which is known as taking the "long" position, whereas if they think the price will fall they will sell futures, or sell "short". Commodity markets are widely used also as a means of foreign exchange speculation for the reason that, in the case of commodities traded internationally, the effects of the exchange rate movement will be combined with the underlying shifts in the value of the commodity.

Incidence

Commodity speculation has a significant global footprint, affecting food security, energy prices, and economic stability across both developed and developing nations. Large-scale financial investment in commodity markets, particularly by hedge funds and institutional investors, has been linked to sharp price volatility in essential goods such as wheat, oil, and metals. This volatility can undermine livelihoods, exacerbate poverty, and trigger social unrest, especially in countries heavily reliant on imports or exports of these commodities.
In 2022, the global wheat market experienced extreme price spikes following Russia’s invasion of Ukraine, with speculative trading amplifying volatility. This contributed to food crises in countries like Egypt and Lebanon, where bread prices soared.

Claim

Commodity speculation is a deeply troubling issue that fuels price volatility, drives up costs for essential goods, and disproportionately harms the world’s most vulnerable populations. By allowing profit-driven investors to manipulate markets for food, energy, and raw materials, we risk global instability and widespread suffering. This reckless pursuit of profit over people’s basic needs is unacceptable and demands urgent, decisive regulation to protect societies from the devastating consequences of unchecked speculation.