page_title: Commodity Futures Modernization Act of 2000
section_title: Food prices
hierarchical_section_title: Commodity Futures Modernization Act of 2000 / Controversies / Food prices
caption_attribution_description: English: The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices, weighted with the average export shares of each of the groups for 2002-2004.
context_page_description: The Commodity Futures Modernization Act of 2000 is United States federal legislation that ensured financial products known as over-the-counter derivatives are unregulated, accelerating the collapses of major financial companies.
  It was signed into law on December 21, 2000 by President Bill Clinton. It clarified the law so most OTC derivative transactions between "sophisticated parties" would not be regulated as "futures" under the Commodity Exchange Act of 1936 or as "securities" under the federal securities laws. Instead, the major dealers of those products would continue to have their dealings in OTC derivatives supervised by their federal regulators under general "safety and soundness" standards. The Commodity Futures Trading Commission's desire to have "functional regulation" of the market was also rejected. Instead, the CFTC would continue to do "entity-based supervision of OTC derivatives dealers." These derivatives, including the credit default swap, are a few of the many causes of the financial crisis of 2008 and the subsequent 2008–2012 global recession.
context_section_description: Institutions such as hedge funds, pension funds and investment banks have been instrumental in pushing up world food prices in the last five years, with investment in food solely as a commodity rising from $65bn to $126bn (£41bn to £79bn) between 2007 and 2012, contributing to 30-year highs. Financial institutions now make up 61% of all investment in wheat futures. According to Olivier De Schutter, the UN special rapporteur on food, there was a rush by institutions to enter the food market following the Commodity Futures Modernization Act.
  
  De Schutter told the Independent in March 2012: 
  What we are seeing now is that these financial markets have developed massively with the arrival of these new financial investors, who are purely interested in the short-term monetary gain and are not really interested in the physical thing – they never actually buy the ton of wheat or maize; they only buy a promise to buy or to sell. The result of this financialisation of the commodities market is that the prices of the products respond increasingly to a purely speculative logic. This explains why in very short periods of time we see prices spiking or bubbles exploding, because prices are less and less determined by the real match between supply and demand.
   In 2011, 450 economists from around the world called on the G20 to regulate the commodities market more. Rising food prices over recent years have been linked with social unrest around the world, including rioting in Bangladesh and Mexico, and the Arab Spring.
caption: FAO Food Price Index 1990-2015
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