Bayer has said it is engaged in mediation to resolve the litigation, which has hit its share price since it acquired Roundup as part of its US$63 billion takeover of Monsanto in 2018.

The company has denied claims that Roundup or its active ingredient glyphosate causes cancer, saying decades of independent studies have shown the product is safe for human use.

The person said that Bayer believes an agreement with plaintiffs’ attorneys to ban advertising would limit the company’s future legal exposure since the “vast majority” of U.S. law firms that would bring such claims would be bound by the agreement.

Bayer declined to comment.

German newspaper Handelsblatt reported on Thursday that Bayer was considering stopping retail sales of glyphosate while continuing to serve farmers, because the bulk of plaintiffs are private users. Bayer did not comment to Reuters on this report.

The company has ruled out putting a cancer warning on the weedkiller because market regulators such as the U.S. Environmental Protection Agency have deemed it safe to use, but that means lawsuits could keeping piling in.

In October, Bayer largely blamed law firms’ TV ad campaigns for the more than doubling of U.S. plaintiffs seeking damages to 42,700 within just three months.

A provision such as the one the company is considering could result in “dramatically fewer claims” so that the litigation is no longer a “big drag on Bayer’s balance sheet,” said David Noll, a professor at Rutgers Law School and expert in mass torts, who is not involved in the litigation.

In January, court-appointed mediator Ken Feinberg put the number of Roundup cancer claimants at more than 75,000, which includes those that have not been filed. Bayer said the claims it has been served with in court were below 50,000.

While such a provision is unusual, there is precedent.

As part of a 2013 settlement between Merck and Co. and plaintiffs claiming the company’s Fosamax osteoporosis drug caused jaw injury, lawyers pledged that they did not intend to “solicit claims” that arose after the settlement.

Perry Weitz of Weitz and Luxenberg, one of the leading plaintiffs’ firms involved in the Roundup litigation, criticized an idea to bar firms from advertising for future clients.

“A company cannot ask a lawyer to enter an agreement to restrict his practice in the future,” he said.

He said there had not been “serious discussions about future cases,” but declined to elaborate.

Michael Miller of The Miller Firm, another major party in the talks, said that “it is possible, if done correctly, to manage the exposure to future claims.” He declined to elaborate.

Three other plaintiffs firms who have brought the bulk of the claims — Baum Hedlund Aristei and Goldman; Andrus Wagstaff PC; and Holland Law Firm — declined to comment. Moore Law Group PLLC did not respond to requests for comment.

Bayer’s shares have lost about 20 per ce t of their value since August 2018 when a California jury in the first lawsuit over Roundup found Monsanto should have warned of the alleged cancer risks. Bayer has lost two more jury verdicts and is appealing all three rulings.

— Reporting for Reuters by Ludwig Burger, Patricia Weiss and Arno Schuetze.

Q+A: What are the obstacles to Bayer settling Roundup lawsuits?

Reuters — Bayer is in mediation to potentially settle thousands of U.S. lawsuits claiming that the company’s Roundup herbicide causes cancer, but some legal experts said the cases raises novel questions that may prevent an easy settlement.

More than 42,700 plaintiffs claim Roundup causes a type of cancer called non-Hodgkin’s lymphoma.

Bayer to date has lost three U.S. jury trials in the Roundup litigation. The company is appealing or has vowed to appeal the decisions, saying Roundup and its active ingredient glyphosate are not carcinogenic and safe for human use.

Legal experts outlined several obstacles the parties may face on the path toward settlement.

Why is the Roundup litigation different from other product cases?

Settlements involving drugs, medical devices or consumer goods often result in the addition of a warning label, a recall or the outright discontinuance of a product. Those steps generally close the door to future lawsuits, making settlement costs and risks predictable.

Bayer has never publicly considered pulling Roundup off the market. The company in June announced a $5.6 billion investment to research and develop a glyphosate alternative.

Bayer unit Monsanto began selling Roundup in 1974 and while the formulation is no longer patent-protected, Roundup remains widely available today. Bayer has repeatedly said Roundup is safe and important to farmers who use the herbicide in combination with the company’s genetically modified seeds

Non-Hodgkin’s lymphoma on average can take up to 10 years to emerge, increasing the likelihood of claims being filed after the litigation has settled. Product liability settlements generally include a cut-off date for future claimants and need to be properly funded for a court to approve the agreement.

As long as the product continues to be sold without changes to the label, plaintiffs may continue to file lawsuits, said Elizabeth Burch, a law professor at the University of Georgia.

Could Bayer add a cancer warning?

Plaintiffs’ lawyers, who claim the company manipulated the science, told Reuters they would insist on a cancer warning label as part of any Roundup settlement.

Such a warning has been rejected by the U.S. Environmental Protection Agency, which regulates pesticides and repeatedly has found glyphosate to be safe.

The agency said it has finished a regulatory review that found glyphosate is not a carcinogen.

In a filing to a federal appeals court, which hears one of the appeals to a jury verdict, the EPA and the U.S. Justice Department backed Bayer and said it was unlawful for manufacturers to make label claims that differ from EPA approval.

David Noll, a professor at Rutgers Law School, said adding a cancer warning over a regulator’s explicit opposition presented unchartered legal territory.

How could Bayer settle the Roundup litigation?

To settle product liability litigation, companies generally set up a fund and the parties define criteria that current and future claimants must fulfill to receive compensation.

In the Roundup litigation, claimants could be divided into different groups depending on the frequency of their Roundup use and disease severity and length.

But Adam Zimmerman, a law professor at Loyola Law School, said defining those groups is complicated by the lack of a signature disease associated with Roundup, making it difficult to predict Bayer’s liability.

For example, in asbestos litigation, mesothelioma, a rare tissue cancer, was recognized as a signature disease caused by exposure to asbestos fibres.

Doctors recognize several risk factors leading to non-Hodgkin’s lymphoma, but the disease is largely considered to have no known cause. Around 74,000 people in the United States are expected to be diagnosed with the disease in 2019, according to the American Cancer Society.

Settling claims might not preclude future lawsuits if the fund runs out of money. In the Agent Orange litigation, Vietnam War veterans were allowed to sue chemical companies decades after a settlement was reached because the compensation fund was depleted by the time they developed their diseases.

— Reporting for Reuters by Tina Bellon in New York.

The post Bayer considers new tactic in Roundup settlement talks appeared first on Alberta Farmer Express.

The deal, for roughly 470 Swiss francs (C$649) per share, would be the biggest cross-border deal involving a Chinese buyer and mark an acceleration of a shakeup in the global agrochemicals industry. Negotiations are in final stages but nothing has been signed, the two sources said.

It will likely be announced on Wednesday, when Syngenta is scheduled to release 2015 results, the people said.

One source said minor adjustments to the price were still being discussed.

Syngenta shares closed 3.7 per cent higher at 392.30 francs in European trade on Tuesday.

ChemChina’s offer would be at a premium of about 24 per cent to Syngenta’s Monday close of 378.40 francs.

Syngenta will not have to pay a considerable breakup fee if the buyout fails, the two sources said.

While this potentially leaves the door open for peers including U.S. seed company Monsanto or BASF to top ChemChina’s offer, the people said that Syngenta was not actively soliciting counterbids.

Syngenta last year spurned takeover approaches from Monsanto, arguing it can create value on its own.

Last month, Monsanto’s CEO said attempts to re-engage Syngenta about a potential takeover had been difficult but that he believed there was still “a significant opportunity” for integration between the companies.

Syngenta declined to comment. ChemChina was not immediately available for comment outside regular business hours. Bloomberg had reported earlier on Tuesday that the deal was near.

Any deal would likely be reviewed by the U.S. Committee on Foreign Investment, which probes transactions with potential national security implications, but two CFIUS experts said they doubted that the inter-agency group would stop it.

“It looks like they (Syngenta) have a lot of U.S. operations but it doesn’t look like they are sensitive,” said one CFIUS expert, adding that he would be “very surprised” if the company failed to register the merger with the agency.

It is rare for CFIUS to stop a deal, although it did block Philips’ sale of high-end lights to China’s GO Scale Capital just last month.

Given other mergers in agricultural chemicals, such as DuPont’s and Dow Chemical’s agreement to combine, Syngenta chairman Michel Demare recently conceded that “going it alone is hardly possible,” given what shareholders were expecting.

The likely takeover price would nominally match Monsanto’s revised cash-and-stock bid made last August but the value of that offer would have fallen along with Monsanto’s share price.

ChemChina’s move marks another instance of the country’s quest for Western technology and distribution networks.

Similar transactions include last year’s buyout of Italian tire maker Pirelli by ChemChina. In January, ChemChina announced the acquisition of German industrial machinery maker KraussMaffei Group for about US$1 billion.

The Chinese government is keen to boost farming productivity as it seeks to cut reliance on food imports amid limited farm land, a growing population and higher meat consumption.

A global glut of corn and soybeans has depressed grain prices for the past three years, prompting U.S. farmers to reduce spending on everything from equipment to seeds and pesticides. The cutbacks, along with pressure from investors and a desire to bolster profit, have sent many of the world’s largest agricultural companies scrambling to cut deals.

The U.S. Department of Agriculture has estimated that net farm income sank to $55.9 billion last year, down nearly 55 per cent from an all-time high in 2013. Prices for U.S. corn have halved from three years ago. ($1 = 1.0194 Swiss francs)

— Reporting for Reuters by Arno Schuetze and Pamela Barbaglia. Additional reporting for Reuters by Amrutha Gayathri in Bangalore, Sue-Lin Wong in Hong Kong, Diane Bartz in Washington and Tom Polansek in Chicago.

The post ChemChina said close to striking deal for Syngenta appeared first on Alberta Farmer Express.

K+S shares dropped 24 per cent after Potash announced its decision in a statement, wiping almost 1.5 billion euros off the company’s market value.

An acquisition of K+S would have given Saskatoon-based PotashCorp an opportunity to realize savings from selling potash within North America from its own Western Canada mines and from K+S’s Legacy mine, under construction at Bethune, Sask., northeast of Moose Jaw.

However, senior K+S executives dismissed the Saskatchewan company’s 41-euro-per-share cash bid — which represented a 59 per cent premium to the volume-weighted average of K+S’s share price during the prior 12 months — as too low, and refused to negotiate.

Since PotashCorp made its offer to K+S privately at the end of May, shares of K+S peers have dropped by around 40 per cent amid concerns over weakening demand from China, the world’s largest consumer of potash.

“We withdrew our proposal, frankly, with some disappointment as the strategic rationale for the transaction was compelling in our view,” PotashCorp CEO Jochen Tilk said in a letter to K+S’s supervisory board, dated Sunday and obtained by Reuters.

“Nonetheless, in light of the market conditions… and a lack of engagement by K+S management, we have concluded that the pursuit of a business combination with K+S is no longer in the best interest of PotashCorp’s shareholders,” he said.

K+S chairman Norbert Steiner said in a statement Monday that PotashCorp’s decision “creates clarity” for the German firm.

“We are convinced that we can successfully develop our company based on a consistent implementation of our two-pillar strategy in the long term. We are strong in potash and in salt.”

K+S had previously voiced fears that PotashCorp could dismantle the company and eliminate jobs, and that its pledges to the contrary were too vague. PotashCorp argued its proposal was not based on closing mines, curtailing production, selling K+S’s salt business or cutting jobs.

“This will increase pressure on K+S management to come up with measures to improve the value of K+S in this challenging commodity environment,” Baader Bank analyst Markus Mayer said.

Equinet analyst Michael Schaefer, who recommends that investors buy K+S shares, said the German company’s upcoming investor day on Nov. 12 could be a good opportunity for management to try to persuade investors of its value.

PotashCorp, meanwhile, plans to focus on its growth strategy, according to people familiar with matter who asked not to be identified as the matter remained confidential.

— Reporting for Reuters by Greg Roumeliotis in New Tork and Arno Schuetze in Frankfurt. Additional reporting for Reuters by Rama Venkat Raman in Bangalore, Maria Sheahan and Patricia Weiss in Frankfurt. Includes files from AGCanada.com Network staff.

The post PotashCorp withdraws takeover bid for K+S appeared first on Alberta Farmer Express.

K+S, which would become the first German blue-chip firm in a decade to be bought by a foreign company, said it was “assessing the available options” after announcing PotashCorp’s “written proposal… for the acquisition of all shares” on Thursday.

Neither K+S nor PotashCorp put a dollar amount to the proposal in their brief statements confirming the proposal, but two sources close to the matter said K+S would likely reject the proposal as too low.

K+S believes Potash wants to take capacity out of an oversupplied market to boost profitability, the sources said, adding it might close some of K+S’s high-cost German mines and sell its salt business.

Saskatoon-based PotashCorp is operating well below full capacity because of weak prices for potash, which is mostly used in fertilizers.

Both companies declined comment on Friday.

One of the sources said PotashCorp proposed to pay 41 euros (C$56.40) a share, a 41 per cent premium to K+S’s closing price on Thursday and 43 per cent above the weighted six-month moving average price, according to Thomson Reuters data.

K+S shares rose 30 per cent to close at 37.66 euros, after touching a three-year high of 40.285. Potash shares were down 2.4 per cent in Toronto and New York in early afternoon.

K+S is the world’s fourth-largest potash maker, trailing the North American export pact Canpotex made up of Potash, Mosaic Co. and Agrium, as well as Uralkali and Belaruskali.

A deal with PotashCorp would be the first big global potash merger since Uralkali bought Silvinit in 2011.

PotashCorp’s bid is the latest move by a North American company on a European rival, as U.S. and Canadian firms take advantage of low interest rates and a weak euro.

U.S. seeds company Monsanto is trying to buy Swiss peer Syngenta, while in retail, Saks owner Hudson’s Bay Co. agreed this month to buy German department store chain Kaufhof.

Oversupply

Bernstein analysts said Potash was probably attracted by the two million-tonne Legacy potash mine, which K+S is constructing at Bethune, Sask., northeast of Moose Jaw.

“An acquisition could prevent K+S’s Legacy from becoming a market price spoiler as it adds capacity to already over-supplied global and North American markets,” they said in a note.

Citigroup analyst Andrew Benson agreed, saying Potash could shut some of K+S’s high-cost capacity in Europe.

Others questioned the proposal’s rationale and said it would likely face stiff resistance.

The premier of the German state of Hesse, where K+S is headquartered, said local jobs must not be threatened.

One of the sources said the proposed offer did not reflect the value of the Legacy project. K+S has spent two billion euros on the mine, which is now 75 per cent completed.

The proposal is PotashCorp’s second tilt at K+S. A bid to acquire a majority stake in 1997 was blocked by Germany’s competition watchdog.

The sources said, however, that antitrust hurdles would play a lesser role this time.

In 2010, PotashCorp itself was the target of a US$39 billion hostile bid from mining company BHP Billiton, but that deal was foiled by the Canadian government.

Fears of a second approach by BHP may be behind Potash’s attempt to bulk up, said John Goldsmith, vice-president of Potash shareholder Montrusco Bolton, which bought additional shares on Thursday.

“When one of the lowest-cost producers is buying a higher-cost producer, it doesn’t make a lot of sense,” he said. “Ultimately, this is possibly a way to stave off a second BHP bid.”

The once-tight global potash market has become over-supplied, while competition has heated up since Uralkali and Belaruskali stopped selling potash together in 2013.

— Arno Schuetze and Ludwig Burger report for Reuters from Frankfurt. Additional reporting for Reuters by Rod Nickel in Winnipeg and Euan Rocha in Toronto.

The post K+S shares surge after PotashCorp takeover approach appeared first on Alberta Farmer Express.

K+S’s management and board are still due to discuss the offer from Saskatoon-based PotashCorp, and a decision has not yet been taken, but at first sight the bid is deemed as too low and making little strategic sense, the person said.

The value of a mine K+S is building at Bethune, Sask., about 60 km northeast of Moose Jaw, is so far not reflected in K+S’s share price and Potash’s move for the German company is therefore seen as opportunistic and undervaluing K+S.

“The strategy for Potash is to take capacity out of the market to increase its own returns,” the source said, adding that K+S would likely see its relatively high-cost German mines closed after a such deal.

K+S, which has a potash and salt business, also fears Potash will sell the salt business after any deal, the source said.

Earlier, German newspaper Handelsblatt reported Potash was considering making an offer of 40 euros (C$55) per share or more than seven billion euros, citing financial sources.

PotashCorp confirmed late Thursday afternoon it has made a “private proposal” to K+S to negotiate a deal to buy the company.

However, PotashCorp said, there is still “no certainty” an offer will be made, nor any certainty yet as to the terms of such an offer.

— Arno Schuetze is a Reuters financial correspondent based in Frankfurt. Includes files from AGCanada.com Network staff.

The post Germany’s K+S seen likely to reject PotashCorp offer appeared first on Alberta Farmer Express.

Monsanto is expected to tap German chemicals group BASF, an existing joint venture partner, as it seeks a buyer for the U.S. seeds business of Syngenta, which can’t be part of its proposed takeover, sources said.

The St. Louis-based group is after Syngenta for its industry-leading crop chemicals, driven by the idea that seeds and pesticides will be better sold and developed together.

Monsanto produces glyphosate, the world’s most widely used broad-spectrum herbicide, and has engineered a range of proprietary crops that resist it.

Syngenta closely integrated its seeds and crop chemicals operations in 2011 and Monsanto is expected to unravel some of the main strategic decisions that shaped the group over the last four years — selling off seeds and merging Syngenta’s crop chemicals with Monsanto’s seeds.

Global antitrust authorities are expected to demand remedies to reshape the balance of power in the crop protection industry before any combination is allowed.

Syngenta’s management will not want to be seen backing a deal that is then shot down by antitrust watchdogs, two industry sources said.

Monsanto commands about a quarter of the $40 billion global seeds market while Syngenta’s own seeds business has a global market share of eight per cent (all figures US$).

The Swiss group’s seeds business could be worth between $6 billion and more than $8 billion, according to analysts. It will have to be sold because authorities are expected to block Monsanto from entrenching its dominance of the U.S. soy and corn seeds market.

Monsanto has worked closely with BASF since 2007 when the two companies established a joint venture to develop higher-yielding and stress-tolerant versions of corn, soy, cotton and canola.

But Monsanto could also sound out Chinese companies such as China National Chemical Corp. (ChemChina) for Syngenta’s glyphosate-based herbicides, a sector banker said, pointing to products containing glyphosate as likely to raise antitrust concerns.

“What Monsanto needs is a stronger antitrust case,” said another source, who is close to a rival chemicals group monitoring the situation and asked not to be named.

The U.S. group has so far been unable to get a firm commitment from prospective buyers which include German pharmaceutical and chemical company Bayer, another banker familiar with the industry said.

The bankers said some suitors will likely demand chunks of Monsanto’s seeds business as part of any deal.

Zuercher Kantonalbank analyst Martin Schreiber said Dow Chemical could be another possible bidder for Syngenta’s assets.

Liberum analyst Sophie Jourdier said antitrust issues would not be insurmountable but highlighted the risk that U.S. farmers might lobby authorities to consider the combined group’s dominance of the broader agricultural inputs market and not look at seeds and chemicals separately, which would put the entire deal at a risk.

Monsanto is looking to a new generation of compounds, such as Syngenta’s Acuron herbicide to replicate the success of the glyphosate-centred seeds franchise.

Spokesmen at Monsanto, Syngenta, BASF and Bayer declined to comment while representatives at Dow Chemical and ChemChina were not immediately available for comment.

— Reporting for Reuters by Pamela Barbaglia in London and Arno Schuetze and Ludwig Burger in Frankfurt. Additional reporting by Greg Roumeliotis and Mike Stone in New York.

The post Monsanto’s Syngenta gambit seen hinging on sale of seed businesses appeared first on Alberta Farmer Express.

Swiss crop chemicals maker Syngenta is working with Goldman Sachs to assess the merits of a sale to the world’s largest seeds company Monsanto, which is being advised by Morgan Stanley, the sources said.

Rumours of talks between the two companies gained momentum at the end of April, sending shares in Syngenta to a record high of 351 Swiss francs (C$461) on May 4 before easing amid a broad decline in equity markets.

Spokesmen at Monsanto, Syngenta, Goldman Sachs and Morgan Stanley declined to comment.

U.S. company Monsanto, which initially approached Syngenta last year, has long been interested in its Swiss rival and the potential to base itself in Switzerland and benefit from lower taxes, one of the sources said.

Following attempts by the U.S. Treasury to clamp down on such moves, known as tax inversion, Monsanto may have to buy Syngenta in a cash rather than stock transaction and would be unable to redomicile in Switzerland, an industry source said.

The St Louis-based group, however, might struggle to finance such a deal, which could cost up to $40 billion, and may need to find a partner to take on Syngenta’s U.S. seeds business before launching a takeover bid, another person familiar with industry said (all figures US$).

Monsanto foresees strong benefits from a takeover of Syngenta, which makes heavy research and development (R+D) investments in crop technology to increase the average productivity of crops such as corn, soybeans, sugar cane and cereals.

Monsanto, meanwhile, is focused on conventional and biotech seeds and last year raised its R&D spending to $1.7 billion from $1.5 billion in 2013.

“There is a clear strategic logic to a deal,” one of the industry sources said. “Syngenta is the only available target in crop protection. It’s no wonder Monsanto continues to circle the company.”

A deal would come as prospects for genetically modified (GM) crops are improving in the European Union after a change in its legislation unlocked a stalled approval process. Monsanto owns the only GM product approved for cultivation in the EU, a modified maize.

Despite the two companies’ cultural affinity, a merger may be challenged by antitrust regulators, primarily in North America, where the two groups are already seen as market leaders in the seeds industry.

Syngenta would need to go through a portfolio clean-up and carve out its U.S. corn and soybean businesses, said a banker close to other potential bidders weighing their options, hoping to derail a deal that would reshape the industry.

Rival suitors?

German chemicals company BASF and U.S. petrochemicals group Dow Chemical could be among possible bidders for all or parts of Syngenta, one of the sources said.

He mentioned Chinese state-owned firm, China National Chemical Corp. (ChemChina), as another possible buyer with strong appetite to bulk up its European presence, though Syngenta may be reluctant to cede control to an Asian rival.

“No one wants to make the first move,” the source said. “Everyone is waiting to see the level of the first bid before reacting.”

Syngenta has not been open for any deal, another source said. “They are a proud Swiss company. They see themselves as market leader and wouldn’t agree to anything without a fight.”

Spokesmen at BASF and Dow Chemical declined to comment, while representatives of ChemChina were not immediately available for comment.

Syngenta, which was formed in 2000 by the merger of Novartis Agribusiness and Zeneca Agrochemicals, also competes with Bayer CropScience and DuPont Pioneer.

— Pamela Barbaglia and Arno Schuetze are Reuters correspondents covering mergers and acquisitions (M+A) from London and the banking sector from Frankfurt respectively. Additional reporting for Reuters by Greg Roumeliotis and Mike Stone in New York and Sybille de La Hamaide in Paris.

The post Monsanto, Syngenta hire advisors on possible takeover appeared first on Alberta Farmer Express.

Commerzbank followed at least two other German banks in restricting investments in agriculture, while most banks and fund managers have defended investment in commodities, saying that price jumps have been due to heavy demand and shortages.

Germany’s second-largest bank declined to give details about the reason for its decision to remove agricultural commodities from an exchange-traded fund (ETF), but German lobby group Foodwatch said the decision was because of ethical concerns.

"Commerzbank is reacting to the debate about a series of studies which show that investment in this type of commodity fund pushes food prices upwards and so contributes to the hunger crisis in many parts of the world," Foodwatch said.

Agriculture has been removed from the ComStage ETF CB Commodity EW Index TR, a Commerzbank spokeswoman said, declining to elaborate.

The fund, which has assets of $145.1 million, was restructured on July 30 and now contains 12 metals and energy commodities, Commerzbank said on its website (all figures US$).

"I think that more and more investors are sensitive to banks’ exposure to agriculture. In the last 12 months, there’s been lots of discussion about ethical investment," said David Bicchetti, economics affairs officer at the United Nations Conference on Trade and Development (UNCTAD).

In March, Germany’s largest bank, Deutsche Bank, said it would not issue new investment products in agricultural commodities this year while it researches the impact of investment in commodities on food prices.

DekaBank, which is owned by the German savings banks, said in April it was pulling out of investing in basic food stuffs, such as wheat, soy, maize and meat.

Grain prices soar

A drought in the United States, which is the worst to hit the Midwest in 56 years, pushed up corn prices by almost 23 per cent in July.

"The poor U.S. harvest but also outside speculation have played a role in the price rises," said Foodwatch spokesman Martin Ruecker.

The surge in grain prices and a series of investment bank trading scandals have stirred up debate over whether investors — including institutions such as pension funds — are responsible for inflating food prices because they have been buying raw materials mainly through bank-backed commodity index funds.

In the U.S., these typically passive investors have ploughed some $200 billion of net investment into commodity futures markets over the past decade or so, more than a third of that in agricultural contracts such as wheat and coffee, according to Commodity Futures Trading Commission data.

But the trend dates back to 1992, when Goldman Sachs received approval from the CFTC to exceed limits on investing in grain markets to market its commodity index, the GSCI.

After the 2008 spike in prices, however, politicians clamoured for new limits on excessive speculation across all commodity markets. New "position limits" rules, approved late last year, will cap passive investment in the biggest indexes.

The GSCI and the Dow Jones-UBS indexes, both owned by McGraw-Hill’s Standard + Poors, are by far the largest of such commodity baskets. There is more than $80 billion tracking each of those products, and they include agricultural commodities.

S+P Dow Jones Indices, which represent the two indexes, said there was "clear evidence" that fundamental supply-and-demand drove grains prices, although there was an ongoing debate at industry level on whether investments were responsible.

"Debatable"

"S+P Dow Jones Indices does not build or change its indices based on debatable results," Jodie Gunzberg, head of commodity indexing at S+P Dow Jones Indices, said in an email.

Goldman Sachs forecast that corn, soybean and wheat prices would go even higher over the next three months due to the severity of the U.S. drought. In the same note, Goldman advised its clients to lock in current prices and buy upside options in anticipation of the higher prices it was forecasting.

Banks outside of Germany have not joined the move to curb investment in agriculture, despite heavy lobbying by groups such as Britain’s World Development Movement (WDM) for strict regulation on speculation in commodities.

"It’s great that Commerzbank has decided to pull out, but I wouldn’t want to wait for a voluntary approach from banks," said Amy Horton, food campaigner at WDM.

"In the U.K., there’s been a spate of scandals over the last few months, and banks still think they can act with impunity. We need regulators to set standards."

— Arno Schuetze writes for Reuters from Frankfurt, Germany.

The post Major German bank pulls ag from fund on food fears appeared first on Alberta Farmer Express.