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Essay Example: Regulation of the Food Commodity Market

2021-07-27 21:05:05
3 pages
616 words
University/College: 
Boston College
Type of paper: 
Essay
This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

The trading of food commodities, in the interes should be monitored and regulated by an independent agency. There have been benefits associated with the de-regularization of the trading of food commodities in that it has encouraged the farmers to increase their output, hence sell at a better price. The good price of the produce means that the producers earn more income, and the world has increased the supply of food in the world. However, this food is not available to the poorest, hence the need to regulate the food commodity trade.

The deregulation of the food commodity market has led to heavy investment in the food commodity market, which is regarded as a safe commodity to trade in because of the increasing need for food. This is considering the growing population and the demand for food used in the production of biofuels. However, the trade of the food commodities whose price increase as more brokers sell the commodities in the financial markets has meant that the food commodities are overvalued. A situation where the value of the food products associated with the securities is lower than the price of the food commodities means that there is a bubble that is likely to burst. The bursting of food commodity bubble may lead to the financial crisis as it happened in the year 2008, considering that there was a similar scenario where financial institutions invested in deregulated real estate sector securities.

While the farmers and the investors in the securities continue to benefit from the food commodity prices, there has been a general increase in the price of food products all over the world. The increase in the food prices is not related to the market forces of supply and demand, considering that demand has not increased significantly over the years, and the supply has not significantly fallen. The increase in prices is purely based on speculation in the market, and this is why companies are buying commodities such as Cocoa in the market to drive the price of the chocolate up hence profit from the business (Leahy). Allowing this will mean continued exploitation of people by large companies hence increased costs of living in all parts of the world.

The modern world is a global village, and it is rational to ensure that the life of every individual is protected. However, the deregulation of the food commodity market has meant that the wealthy individuals and companies are taking advantage of the poor people in the society, leading to the death of many people in the world because of famine. Large companies owned by few individuals are leading to the high price of food in the market, such that individuals die because they cannot afford anything to eat (Vidal). It is unethical to have food getting used to producing biofuels when many people are dying because they cannot get food. It should be noted that a few large companies influenced the cancellation of contracts involving the supply of food to China and India because the Russian companies were keen to sell the food at high prices. Regulating food commodities can help eliminate the high prices.

In summary, there is a need to regulate the food commodity market to ensure that the world has enough food to eat. Failure to regulate the food commodity market may cause a burst that can lead to a financial crisis.

 

Works Cited

Leahy, Stephen. "Rampant Speculation Inflated Food Price Bubble | Inter Press Service." Inter Press Service | News and Views from the Global South, 2011, www.ipsnews.net/2011/01/rampant-speculation-inflated-food-price-bubble/.

Vidal, John. "Food Speculation: AFood Speculation: 'People Die from Hunger While Banks Make a Killing on Food'." The Guardian, 31 May 2017, www.theguardian.com/global-development/2011/jan/23/food-speculation-banks-hunger-poverty.

 

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