Swiss government's study on commodity speculation lacks new insights

A recent report by Bloomberg highlights Switzerland's lackluster attempt to address the impact of speculation on agricultural-commodity markets. 

The Swiss federal government had a straightforward request for its lawmakers: create a report on the effects of speculation in agricultural-commodity markets. They had over two years to complete the task and, importantly, they had the resources. Switzerland is the headquarters for the global commodity trading sector. 

However, instead of providing clarity on the issue, the anonymous authors produced a 28-page report that seemed hastily written, resembling the work of a first-year college student pulling an all-nighter—or perhaps something generated by ChatGPT upon being asked to “write a dull report on commodity speculation in the style of the Swiss Federal Council, avoiding original research, ignoring industry criticism, and leaving out any names.” 

The report is more telling for what it leaves out than for what it includes. For instance, it completely omits the names of the largest players in the sector, many of which have significant operations in or near Geneva, such as Cargill Inc., Bunge Global SA, Archer-Daniels-Midland Co., Louis Dreyfus Co., and China’s Cofco International Ltd. It also avoids any mention of the concentration of trading power among these firms, or any insight into how much money they made during the recent price surges. If a report on agricultural commodities fails to include the earnings of the major players, it shows a fundamental lack of understanding of the industry.

Instead of conducting original research, the Swiss study primarily analyzes the findings of other reports. The issue is that some of these reports were already meta-analyses—analyses of previous analyses. In the end, the Swiss took two years to evaluate others' research. Despite this, the conclusion remains optimistic. “According to the vast majority of scientific studies, there is little evidence that speculation on foodstuffs pushes prices up,” it states. “On the contrary, many studies even conclude that speculation has a moderating effect on price fluctuations.” The literature that contradicts this view, including a significant paper co-authored by the current chief economist of the UN’s Food and Agriculture Organization, is largely ignored.

This is unfortunate because the topic of speculation in agricultural commodity markets warrants further investigation, particularly after three major price spikes in the last 15 years: in 2007-08, 2010-11, and 2021-22. This issue is even more pressing as the industry continues to consolidate through mergers, placing more control in fewer hands.

By Naila Huseynova