Ensure more transparent derivative markets for agricultural commodities
Increasingly volatile & less predictable wheat markets
The market price of all grades of wheat - including bread-making wheat - fluctuates depending on quality, supply & demand, stock levels, exchange rates, transport & energy costs or developments elsewhere in the world.
Excessive levels of speculation can also lead to sudden or unreasonable & extreme fluctuations in agricultural commodity prices. For ex., this occurs when an increasing share of open interests is held by investors interested in gaining from future price movements with little regard to the fundamentals of commodity demand & supply.
Millers need more transparency
Commodity derivative markets provide risk management tools (futures & options) to enable primary food processors, such as millers, to hedge against the risk of price fluctuations in the future.
When implementing MiFID 2, ESMA rules should inspire trust and encourage European flour millers, who are mostly small & medium-sized companies, to increasingly use those hedging tools.
For that purpose, ESMA's regulatory technical standards should introduce greater transparency to preserve market integrity & support orderly pricing.