LEI has carried out a study for Oxfam Novib on the recent price trends in the international grain market and the trends in market concentration in grain trading and processing. Oxfam Novib had two specific questions:
- Has excessive speculation given rise to higher prices?
- International grain trading is dominated by just a small number of players (such as Bunge, Cargill and ADM). Has this given rise to higher prices and therefore greater profit margins for these multinationals?
LEI has found no evidence for a relationship between speculation and higher grain prices. Although more speculative trading has taken place, the volume of non-speculative trade has also grown. In addition, the causes of the high prices appear to lie elsewhere (both in supply and demand factors).
Although the large multinationals did make greater profits in the period in which grain prices peaked, LEI has not been able to demonstrate that this was due to speculation by these multinationals. LEI did draw the conclusion that these multinationals have the advantage of great flexibility due to their global networks of purchasing and sales bases. In addition, these multinationals are active both on the output side (grain trading) and on the input side (artificial fertiliser), as a result of which they form integrated chains.