The United Nations Conference on Trade and Development (UNCTAD) today cautioned on rampant speculations in the global commodity markets which is fuelling unprecedented price hikes around the world, with worst effects on poor countries such as India.
"Financial speculation in global commodities trade is a source for concern as it contributed to steep price hikes," UNCTAD's Secretary General Supachai Panitchpakdi said on the sidelines of a special meeting convened by UNCTAD to address the distortions in global commodities trade.
"Though factors like supply-demand imbalances, concerns relating to food security, and unpredictable shifts in production from food products to bio fuels have also contributed to volatility, it is financial speculation which is causing greater uncertainty and turmoil in the commodity markets at this juncture," he told PTI.
"We are doing a study on the impact of financial speculation on commodities trade,” he said, underscoring the need for tackling the problem at the upcoming G20 leaders meet in France this year.
As oil prices touched USD 100 billion and prices of food products, particularly wheat and sugar, rose steeply in the recent months, he called for a concerted action to address financial speculation.
Ongoing political turmoil in Egypt and severe winter in North America have also contributed to the rise in global oil prices. India, which is heavily dependent on imports of oil and farm products, will have to prepare for contingency measures, analysts said.
He dismissed suggestions that growing demand in India and China have contributed to the sudden prices hikes, arguing that "there are a combination of factors, particularly financial speculation, responsible to volatility in global prices.
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"I don't think we can single out demand in China and India for the current volatility in global prices. 2011 will see the prices of most commodities rise, as the rise in global GDP bolsters demand, led by emerging economies," said the World Trade Organisation Director General Pascal Lamy.
"There are serious concerns about the way in which commodity markets have been evolving in recent years," said Panitchpakdi, pointing out that "since mid-2010 commodities have for the second time in three years, been experiencing extreme high price volatility".
"Besides, natural events such as floods in Pakistan and fires in the Russian Federation, events which may be linked to global warming, have spurred upward pressure on prices for agricultural goods such as wheat and cotton," he added.