Università Cattolica del Sacro Cuore

Food and finance, the role of regulation - issue#2

Agricultural Economics and Financial Markets Law together to find solutions against markets’ instability.

The systematic instability of agricultural markets has always been a key factor in agricultural policies. The biological nature of agricultural production processes and their strong dependency on natural and climatic conditions induce a higher degree of uncertainty surrounding the economic performance of farm enterprises, in comparison to what happens in other industries.

Over the period 2002-2013, international agricultural prices doubled and historical peaks were reached in mid-2008 and, in particular, in February 2011. The sharp increase in financial investments in agricultural derivative markets over the last decade has been seen as one of the drivers of these peaks.

After years of financial deregulation, the agricultural commodity price shocks of 2007/2008 and of 2010/2011 acted as a catalyst for governments to strengthen the regulation of derivatives markets, and to reinforce international cooperation among national regulators.

In Università Cattolica del Sacro Cuore, the presence of expertise both in the field of Agricultural Economics and in the one of Financial Markets Law has led to the idea «of starting interdisciplinary research which can on the one hand highlight every possible connection existing between agricultural and financial markets and, on the other hand, can help to identify the most suitable regulatory strategies that can give the finance/agriculture duo a greater role», explained Antonella Sciarrone Alibrandi, Full Professor in Banking and Markets Law, Faculty of Banking, Finance and Insurance Sciences


According to prof. Sciarrone «we are at an important turning point in this sector as we are witnessing a moment of change: from a total absence of regulation to a strong intervention by the European legislator, an intervention which is not yet thoroughly in force and needs secondary legislation. It is exactly in this particular moment that a reflection is due, at an academic level, on the best strategic regulations and on the most efficient policies to guarantee that finance plays a role of support to the agri-food sector».

For this reasons, in Università Cattolica a field of resaerch has started, aiming to examinate the impact of finance on agriculture, and to suggest adequate regulatory solutions.

These reasons brought the university to develop a research field aimed at examinating the impact of finance on agriculture, and to suggest adequate regulatory solutions.

‘Within this research field different research projects were conducted, for example UCSC was involved in the TRANSFOP project, financed by the EU Commission in the context of the 7th Framework Programme. The project has been carried out in the years 2011-14 by a Consortium coordinated by prof. Steve McCorriston (University of Exeter, UK), in which UCSC was one of the partners.  «The main motivation of the project», maintained prof. Paolo Sckokai, UCSC Associate professor in Agricultural Economics, Faculty of Agriculture, «stays in the commodity price crisis of 2007-2008 and the following strong volatility in world commodity markets. The purpose of the project has been that of developing insights into the impact of these events on consumers, on the retail price dynamics and on food price inflation across the EU. TRANSFOP has tried to focus on the potential implications that arises from this for both the research and policy-making communities. The project has benefited from the most recent contributions in economic theory, econometrics, but also law, sociology and management. The main results underline the key role of the main players of the food supply chain: manufacturers’ and retailers’ strategies are crucial for determining the final price of food items for consumers, and for amplifying/reducing the impact of shocks in world commodity markets at the retail level, but also regulators and policies may play a key role, as long as they correctly interpret market dynamics and provide the appropriate tools for addressing price volatility».


The complexity of food markets requires an interdisciplinary approach to the issue of market instability. According to prof. Sckokai, «while economics and econometrics play a natural central role in analyzing the relationships along the food chain and their impact on world and domestic prices, finance and law experts can play a key role in understanding the impact of regulatory policies both at the EU and the national level, with a special focus on the role of financial markets and the use of financial instruments by the actors of the chain for coping with price risk. Finally, management sciences are crucial for understanding farmers’, manufacturers’ and retailers’ strategies, while the role of sociology is related to the key role of food expenditure in the household budget, especially for the poorest sections of society».

«The EU collaboration is also required», according to Sckokai, «since the food sector is extremely diversified across EU member states, both in terms of product specialisations and in terms of structure of the processing and retail sectors. This implies that the same policy/regulation approaches may have different impacts in different countries, and understanding such diversity is crucial for both researchers and policy makers».


As part of this multi-disciplinary approach, on the 9th and 10th of July, the Conference "Food and agricultural markets instability: policies and regulation perspectives" took place at Expo Milan 2015, jointly run by UCSC, the European Commission's Joint Research Centre and the 7th Framework Programme Project ULYSSES (Understanding and coping with food markets volatility towards more stable world and EU food systems)

The first of the two days – July, 9th – was held in the main campus of UCSC (Largo Gemelli 1), while Friday 10th in the EU Pavillion at Expo - Sala Europa. The conference had a very strong linkage with the Universal Exhibition: as a matter of fact, it was part of the activities promoted by the Scientific Committee for Expo 2015 and by the European Union, which had asked Milan’s universities for an active contribution to the debate.

These were two days of interdisciplinary dialogue among international scholars and sector operators organised in the context of Expo Milano 2015 aimed at analyzing the causes of volatility on agricultural markets and at identifying useful methods to reduce such volatility in order to make food systems more efficient, more sustainable and more predictable. During the two-day conference, discussions covered, on one hand, regulatory interventions recently made at global level – and absolutely absent up to a few years ago – and on the other hand, solutions offered by the financial and institutional world.

Speakers from several fields took part in the conference: EU representatives, people from the Bank of Italy and Fao, Italian and international qualified professors – in particular economists and jurists – and sector operators and entrepreneurs.

«Our hope», prof. Sckokai concluded, «is that this conference has kickstarted an interdisciplinary work which may continue to operate in the following months, giving a significant contribution to more efficient solutions supporting the agro-food economy and limiting possible speculative phenomena».

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