Will banning commodity futures halt rising commodity prices?
World market prices for major commodities such as grains and vegetable oils have risen sharply
to historic highs. The recent run-up reflects both long-term trends and short-term events. Slower longterm
growth in global crop production and more rapid growth in demand have tightened world
balances of grains and oilseeds. Recent factors that have further tightened world markets include
increased global demand for bio fuels, feed stocks and adverse weather conditions in 2006 and
2007 in some major grain and oilseed producing areas. Other factors that have added to global food
commodity price inflation include the declining value of the U.S. dollar, rising energy prices,
increasing agricultural costs of production, and policies adopted recently by some exporting and
importing countries to mitigate their own food price inflation.
Commodity Futures trading has frequently courted controversy, especially when prices have
risen. The Indian experience has been in line with that of virtually every other country, which tried
commodity futures. The 133-year history of commodity futures markets in India has been littered
with expansion moderated by regulation to reach the stage it has now ? right on the verge of
globalization. Commodities came to be accepted as an independent asset class globally just a few
years ago. This acceptance started acting against itself. Like other asset classes where bull runs are
glorified, more and more investors started investing in commodities getting good returns. Unlike other
asset classes, the increase in prices of commodities was not appreciated by all. Soon a stage was
reached where these investments, apparently, sta ...