Deutsche Bank reduces ‘hunger trade’

Germany's biggest bank, Deutsche Bank, says it will slow its food-price betting business after almost admitting trade in staple foods was linked to higher food prices and the growing number of hungry people.

Deutsche Bank reduces 'hunger trade'
Photo: DPA

“We recognise that the proper functioning of agricultural markets (has) wide social ramifications,” the bank said in its annual social responsibility report.

It said it was “concerned by the growing number of people who find themselves in food poverty.”

Activists have been protesting against “commodity index funds” by Deutsche Bank and Goldman Sachs saying they are key culprits in the volatility of food prices around the world.

Other German banks known to bet on food prices are Commerzbank and, to a lesser extent, Sparkasse.

The funds enable banks to effectively bet on the development of food prices – and are held responsible for the sharp rise in food prices since 2008.

Deutsche Bank said on Tuesday it would not launch investment products this year dealing in staple food commodities and look more closely at any link with increased hunger.

In response to Deutsche Bank’s announcement, Matthias Wolfschmidt, deputy director of the German NGO Foodwatch, called on the bank to renounce its existing food community products and pledge a lasting ban.

The group of 20 industrial and developing nations pledged last year to take action on rampant food price inflation and curb the influence of speculative investors.

“We agree with international policy makers that transparency in agricultural commodity derivatives markets should be enhanced and measures to avoid misconduct strengthened,” Deutsche Bank said in its report.

But it argued that other factors were also behind rising prices of crucial staples including growing demand, trade restrictions and state subsidies.


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German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.