Speculative trading, one of the major factors behind spiralling food prices in India and consequent food inflation, has now become a major concern for the top international body United Nations.

“Yes, indeed. Financialisation of agriculture products and therefore use in commodity trading is a contributor to the food price volatility,” David Nabarro, the U.N.'s special representative on food security and nutrition said in New Delhi at the sidelines of the two-day International Food Policy Research Institute (IFPRI) conference on agriculture. 

He noted, “This volatility is a cause of concern because it impedes the ability of farmers to make decision they normally expected whether they should take advantage what looked to be like higher prices.”

Food prices hit a record high in January worldwide including India where onions were sold at Rs. 100 per kg. Food inflation stood at 13.07 per cent for the week ending January 29, according to government data released this week. Last month, the World Trade Organisation (WTO) predicted of the commodity prices to increase in 2011.

But the UN is not sitting idle on the crisis. “This year United Nations is involved in some very careful studies on the food price volatility with the conjunction with the G20,” the UN special representative told reporters on Thursday.

“The presidency of the G20 is held by French president Nicolas Sarkozy and he has explicitly requested different entities within the UN with OECD to prepare a report on the nature of the food price volatility, to dampen volatility and also find means to reduce the impact volatility to the vulnerable people,” Nabarro told reporters.

In the first meeting of agriculture ministers’ meeting of G20 nations in June this year, the report is likely to be discussed. “The effort is to try to understand contribution of financialisation of commodities and overall volatility is being taken forward in conjunction with other investment challenges,” Nabarro commented.

However, he added the UN role in this crisis would be of providing information and the countries have to take decision on the speculative trading on agriculture products.