Public and private sector financiers agree on the need for a coordinated response to public concerns about financialization and commodity market volatility. Nevertheless, the views on effective measures to mitigate the problem differ very considerably, and the lack of common understanding of key underlying issues prevents effective joint action. This gap calls for a dialogue to reach agreement on issues of common interest to mitigate commodity market volatility and its costs, as well as to channel financial capital into investments into physical production capacities for key commodities.
Amsterdam, 8 November 2012
This communications announces the agreed report on the first meeting of Public-Private Initiative on Commodity Market Volatility, endorsed by all participants and jointly released by the Common Fund for Commodities and De Novo Agricultura.
The volatility of commodity markets, and increasing role of financing investors have come to prominence recently as one of the factors to be considered in formulating international agenda for development of commodity dependent countries. This was prompted by the new developments in financial markets after 2008, as well as by the food crisis of 2010 and forecasts of further possible food shortages due to production problems in 2012.
In December 2011, the 66th General Assembly of the United Nations adopted a resolution UN/RES/66/188 calling for a high-level thematic debate on the issues of commodity market volatility. International organizations have been invited to participate and contribute to the debate.
The High-Level Thematic Debate took place in April 2012 under the leadership of H.E. Leonel Fernandez Reyna, President of the Dominican Republic. The Common Fund for Commodities participated in the debate, and, through its network of private sector commodity actors, facilitated the participation of the commodity finance sector. In follow-up to the High-Level Thematic Debate, the CFC contributed to the “High Level Event on food price volatility and the role of speculation” held in Rome in July 2012. In this event, the CFC focussed its contribution on commodity dependence, vulnerability and resilience in the face of market volatility as key factors defining the impact of market volatility on the poor.
From these discussions, and its own experience the CFC recognizes that private and public sector parties essentially agree that the socioeconomic impact of commodity market volatility must be addressed. Nevertheless, the views on effective measures to mitigate the problem differ very considerably, and the lack of common understanding of key underlying issues prevents effective joint action.
This gap calls for a dialogue to reach agreement on issues of common interest to mitigate commodity market volatility and its costs, as well as to channel financial capital into investments into physical production capacities for commodities of high socioeconomic significance for CDDCs.
The Public-Private Initiative (PPI) on Commodity Market Volatility is an effort to open such dialogue, and is supported by five major international banks active in commodity trading, with a further two banks interested to join, as well as by the Common Fund for Commodities, and UN agencies with mandates touching on commodities and development.
The first meeting of the PPI on Commodity Market Volatility took place in New York at UN Headquarters on 25 September 2012, facilitated by De Novo Agricultura.
The agreed outcomes of the meeting point strongly to the need for modernised agenda of action in commodity sector, including research on newly emerging issues, effective and feasible practical actions, and better communications.