Global welfare organisation Oxfam claimed a victory this week against alleged food price speculators after two French banks earlier shut down funds linked to agricultural commodities.

In a press release, Oxfam congratulated BNP Paribas and Crédit Agricole for closing the offending products.

In the case of BNP that amounted to suspending "a [US]$214 million agricultural fund" and closing "another fund that was partially-indexed to agricultural commodities".

"Crédit Agricole meanwhile closed three funds that allowed clients to speculate on agricultural commodities," the Oxfam release says.


Apparently, BNP made the call after an Oxfam report, titled 'Banks: profiting from hunger' (as far as I could tell, only available in French) shamed them into action.

According to Oxfam, the latest French move is part of a growing backlash across Europe to the practice of investing in food-related funds, which has seen "German, Austrian and UK banks" perform similar reversals.

Earlier in February UK bank Barclays also made a, somewhat more limited, concession to the campaign, cutting back on agricultural trading activities with hedge funds.

As reported on the earthy Canadian Cattlemen (tagline: 'The Beef Magazine') website, Barclays decision was more about "reputational issues" than any deeply-felt belief it was doing anything wrong.

Canadian Cattlemen (actually it was a Reuters report) quoted an unnamed Barclays source clarifying the bank's stance: "We are not stopping trading in agriculture commodities or softs. We're going to continue to provide a service to our corporate... clients, what we're doing is we're stopping trading with hedge funds."

But why does Oxfam have a beef with the banks anyway?

"Oxfam and other campaigning organizations, together with many economists and development experts, are concerned that financial speculation on agricultural commodities can make food prices more volatile, which can ultimately hurt poor consumers and farmers," the welfare agency release says. "Investments in often excessive and secretive financial products jumped globally from $10 billion in 2004 to $90 billion in 2011."

However, Oxfam's win over the French hasn't convinced everyone.
As Canadian Cattlemen/Reuters reported: "Deutsche Bank last month reversed a moratorium on trading in agricultural derivatives, saying there was no evidence that such activity boosted food prices."

Derivatives, of course, originated in the agricultural sector and were intended to smooth volatile farm incomes rather than serve primarily as profit centres for banks. And while financial derivatives have since earned themselves a bad name (remember the CDO-squared?), they can still serve their original purpose.

The NZX, for example, got its dairy futures operation in action in 2010 with back-office assistance provided by the local arm of BNP Paribas.