In response to growing public pressure against excessive speculation in food and energy markets, Barclays is considering stopping all of its trading in agricultural products due to “potential reputational damage.” Barclays would join a growing number of European banks and pension funds who have recently stopped trading in agriculture futures due to growing concern that this speculation is driving world food prices higher and making them more volatile.
More recently, investors are pulling out of agriculture speculation not only because of these social concerns, but also because, “commodities trading turnover for the 10 biggest investment banks has tumbled 20 percent in the first nine months of this year, and the profitability of operations could be squeezed further by tougher regulations.” As another article questioning the benefits of agriculture speculation ponders, “if CalPERS, among the most sophisticated institutional investors, cannot make money from an index-based approach to commodity investment, supplemented with an active management overlay, there must be doubts about whether other pension funds will be any more successful.”
