With the current extreme price increases for wheat, we are observing potentially the early stages of another global food-price crisis. Even if this does not evolve into something as dramatic as the crisis of 2007-08, when prices of major agricultural commodities from corn to rice shot up to record levels, triggering food riots from Bangladesh to Haiti, it is a stark indication of the perilous state of the world food market. Some lessons have been learned from 2008, but too little has been done to prevent future crises. In particular the malfunctioning of world grain markets has not been addressed – a failure now haunting world markets. The fixing of international food prices today is the result of three forces: expectations on future supply and demand; the growing role of speculators in commodity markets, and the importance of food prices for political stability in countries such as Egypt. Today, low-income countries and the poor are actually more vulnerable than before the last food crisis.

The setting of prices at the main international commodity exchanges was significantly influenced by speculation that boosted prices. Not only are food and energy markets linked, but also food and financial markets have become intertwined – in short, the “financialisation” of food trade. There are increasing indications that some financial capital is shifting from speculation on housing and complex derivatives to commodities, including food. While the financial markets have recently been regulated to curb excessive speculation, commodity markets have remained largely untouched and are the open flank of the system attracting speculation.

Now we must distinguish between necessary measures that should largely be the preserve of national governments and those best handled at the international level. The food price volatility must be addressed at a global level. It is essential to ensure open trade and transparent, appropriately regulated market institutions. Excessive speculation in food commodities should be curbed. For that, increased transparency should be enforced and costs of speculation for non-commercial traders should be raised, for example through capital deposits. However, simply excluding food from speculative futures markets would be wrong, as these activities also play a useful intelligence role. Reliable international grain reserves policies need to be established. The Group of Eight meetings of 2008 and 2009 cited this as an option to be further explored, but failed to act.

Finally, action is overdue to establish a global architecture for policies on agriculture and food. The current system lacks accountability, effectiveness and innovation. Food and nutrition security should figure prominently at the upcoming G20 summit and the UN conference on the millennium goals. They must follow up where the G8 left an incomplete job.

The writer is director of the Centre for Development Research, University of Bonn and former director-general of the International Food Policy Research Institute