Crisis on commodity markets vs. export cartels and speculations on financial markets

BEETHOVEN 1, Principal Investigator OSKAR KOWALEWSKI

The global food crisis of 2007-08 was caused by a sudden increase in food prices, on average approx. 40%. While the dire consequences of soaring prices for developing countries are widely known, the causes of the crisis remain unclear. What's more, little is known about how to limit such phenomena in the future. This project will try to help understand the phenomenon of crisis in the food commodities market by pointing to a possible source. We intend to show the causal link between speculation in the financial and commodity markets and the emergence of export cartels and their impact on the sudden increase in food prices. Our preliminary research (Gnutzmann, Śpiewanowski 2014) provides preliminary evidence that the sources of the crisis lie in the creation of a cartel on the artificial fertilizer market, which led to a significant increase in the prices of food products. The goals of the project are as follows:

  • Understand the influence of speculation in the financial markets on the formation of export cartels and suggest restrictions on speculation that hinder the formation of this type of price collusion.
  • Assess the damage caused by export cartels and suggest international trade regulations that limit damage to affected countries.
  • To assess the importance of speculation in the financial and commodity markets for the emergence of the food crisis, consider the formation of cartels as a transmission mechanism.
  • Create an econometric structural model of the "speculation-cartel-crisis" link