Is the complexity deliberate?

For all the talk of a drive towards simplification, complexity is a built in feature of the Common Agricultural Policy. It makes it more difficult for critics to assess what the real effects of decisions are. It becomes more challenging to mount a sustained and informed critique.

Bringing agriculture into the co-decision mechanism at the European Parliament was unavoidable given that it was a supposed boost to democracy, but an alternative narrative would be that it gave more opportunities for special interests to defend the status quo.

MEPs have tabled no less than 7,415 amendments to the proposed 2014 reform of the CAP before departing for their long summer recess. It will take until September just to translate them.

With 2,292 amendments on direct payments to farmers alone, changes are proposed to almost every part of the Commission's proposals. There are those who wonder whether the sheer volume of amendments is a deliberate strategy on the part of some member states to defend the status quo. France, Germany and Italy come to mind.

It is going to be difficult to complete the reform process on time. Moreover, what was a less than radical reform in the first place is going to be watered down even further.

Financiers spring to defence of ETPs

The controversy over exchange traded products (ETPs) and their effect on food prices continues with some financial providers say they will not withdraw them. In a report issued this April, Finance Watch, a Brussels-based public interest advocacy group argued that excessive commodity speculation raises prices artificially and damages the market for real buyers and sellers. Read more here: Commodities

Others take the opposite view. They point out that the size of the financial market in commodities is tiny in comparison with the physical market and it is the physical market that sets price - the tail does not wag the dog. Nevertheless, the financial market could still have a disproportionate effect in uncertain conditions.

Against that Guy Wolf from commodities broker Marex Spectron commented, 'The futures market is a forum for buyers and sellers to hedge their exposure that benefits both parties and in fact we need more speculation to help absorb volatility.' Indeed, even a report called Farming Money from Friends of the Earth Europe (FoEE) admits that speculators can bridge the gap between buyers and sellers and provide liquidity in the market.

Twenty-five groups including FoEE are urging member states to use this autumn's review of Mifid (the Markets in Financial Instruments Directive) to curb speculation in food and other commodity derivative markets. They are advocating strict position limits and banning financial entities from speculating in commodity markets. Read more here: Speculation

The largest providers of ETPs have made it clear that they have no plans to withdraw these instruments after a number of operators said that they would. Volksbanken of Austria announced that it was withdrawing investment products linked to agricultural commodities and Germany's Commerzbank removed agricultural products from its Comstage commodity exchange traded fund in July. In March Deutsche Bank, the second largest provider of ETPs in Europe, said it would refrain from launching any new ones based on basic foodstuffs.

However, ETF Securities, the largest provider of commodity traded ETPs in Europe and iShares, the world's biggest ETP manager, said they had no plans to scrap their offerings. Their defenders argue that investment in agricultural commodity ETPs do not result in hoarding because they invest in futures unlike physical gold ETPs which hold bullion in a vault.

Globalization of agriculture inevitably led to its involvement in more sophisticated financial instruments which some would describe as socially harmful. Others see them as an efficient market clearing mechanism. Much depends on how influential they are in the market. At present they are not dominant and an outright ban would be an over reaction.

Banks withdraw food commodity funds

There has been considerable discussion about whether speculation drives food commodity prices up, although no definitive answer. My hunch would be that it tends to make them more volatile which creates difficulties for both producers and consumers.

Now a number of European banks are withdrawing vehicles that make it relatively easy for investors to speculate on food prices: Speculation

The decision represents a victory for campaigning groups such as Food Watch, Oxfam and the World Development Movement. The banks were concerned about reputational damage, no doubt enhanced by upward pressure on prices following the drought in the United States.