(Bloomberg) By Rudy Ruitenberg - 1-2-2012 -- European banks, pension funds and insurers fuel hunger through excessive speculation in food commodities, and hard position limits are needed, environmental campaign group Friends of the Earth said.
European Union market proposals must be strengthened by capping the size of bets speculators can make, and index investors should be banned from agricultural-commodity markets, the group wrote in an e-mailed report.
The EU in October proposed to require national regulators to either cap the number of commodity-derivative contracts traders can enter, or make arrangements to the same effect. French President Nicolas Sarkozy, who headed the Group of 20 countries last year, vowed to fight speculation, which he blamed for the plague of record food prices.
Excessive speculation has forced food prices to rise in recent years and has increased the frequency and scale of price volatility, Friends of the Earth Europe wrote in the report.
The group said index funds and exchange-traded funds should be excluded from using indexes that track agricultural commodities, and commodity index funds and related structured and synthetic products should be phased out.
Banks, pension funds and insurers should investigate their involvement in food speculation and direct or indirect land investments, and publish the results, according to the group.
They should liquidate their open positions in food- commodity derivatives and related funds and refrain from further activities that are not directly linked to hedging for farmers, food-processing companies and related commercial traders, Friends of the Earth said.
Banks and insurers should not retail investments in agricultural commodities to end-customers, the group said.