In its February 2012 report on commodity investments, Barclays admitted that an increase in commodity speculation leads to increased prices. The report lists three main causes of the current run-up in commodity prices, stating,
“The second key driver is that commodity investors have begun allocating to commodities again after beginning 2012 heavily underexposed to the sector.”
The report goes on to explain that “net long hedge fund positions across all U.S. commodity futures markets have risen by almost 295,000 lots (39%) in the past four weeks, with especially large increases in soybeans,… corn and soybean oil.” The section ended with, “investor buying should continue to be a positive for commodities.”
So, apparently Barclays is willing to admit to its investors that increased demand from pension funds and other institutional investors does have an effect on food and energy prices. If only they would be so forthright when talking with government officials…
Not just Barclays, but other major banks are growing increasingly concerned about the effects that commodity indexes and exchange-traded funds have on world food and energy prices. A few days ago, Deutsche Bank decided not to create new agricultural investment tools for fear of their possible effects on prices.
And another German back, Dekabank also announced that it would no longer invest in food stuffs for the same reason. Unfortunately, we were only able to find information on this in German.