* Expects national vote on investment ban by 2014
* European banks have cut agricultural contracts from index
* Record high food prices fuel debate on speculation
By Emma Farge
GENEVA, Oct 1 (Reuters) - A Swiss political party is seeking to drum up support for a national vote to ban banks and other financial institutions from speculating in agricultural commodities, in the latest sign of growing political backlash against record food prices.
The exact size of investment in agricultural commodities from Switzerland is unclear, although it hosts banks UBS and Credit Suisse which both invest in the sector through either index funds or exchange traded funds.
It is also home to multinational commodity firms such as Glencore and Cargill.
The Young Socialist Party, is led by 27-year old David Roth and is the youth wing of the centre-left Social Democrats (SP). It has drafted legislation to block a wide group of institutions such as banks and wealth managers from investing in the agricultural commodities market.
Switzerland's system of direct democracy requires the party collect 100,000 signatures on the proposal by early 2014 before a nation-wide vote can be called. The party has had success with a previous proposal and last April collected enough signatures for a vote on creating more equitable salaries.
"We've worked with activists and NGOs and we think it's possible to get the signatures. We are hopeful that in 2013 we will have finished collecting them and by 2015 it could become law," Roth said in an interview with Reuters on Monday.
The initiative 'Stop Speculation' would apply to financial institutions with either their headquarters or a base in Switzerland. It is also supported by the Socialist Party, the Green Party and the Young Green Party.
"Speculation on food leads to high prices that keeps millions of people in a state of hunger and poverty. Switzerland should stop participating in this quest for repugnant profit," Roth's party said in a statement.
The measure would prohibit investments in financial instruments based on agricultural raw materials and foodstuffs, though some contracts with producers would still be allowed. The proposal envisages punishment and possible prosecution for non-compliant firms, it added without elaborating.
A UBS spokesperson did not respond to a Reuters request for comment on whether it intended to continue investing in agriculture. A Credit Suisse spokesperson said it would remove agriculture from if its investments if the Dow Jones-UBS Commodity Index, upon which its fund is based, did this first.
The worst drought in more than 50 years in the United States helped drive agricultural commodities such as corn and soybeans to record highs this summer, and has stirred fresh debate on the role that banks and other investors might have played.
Institutions such as pension funds are seen by many lobbyists as responsible for inflating food prices by buying raw materials mainly through bank-backed commodity index funds.
In the United States, these mostly passive investors have ploughed some $200 billion of net investment into commodity futures markets over the past decade or so and more of a third of that went into agricultural contracts such as wheat and coffee, according to the Commodity Futures Trading Commission.
Lobbyists such as Germany's Foodwatch and Britain's World Development Movement are pushing for strict regulation of commodities by drawing attention to the link between speculation and food shortages in the developing world.
Pressure from such groups is widely seen as the reason for Germany's Commerzbank and Austria's Volksbanken to remove agricultural products from a commodity index fund.
Roth said his party had done extensive research to ensure the law would only apply to speculators and not pre-agreed contracts between producers and physical commodity merchants, which are exempt.
"We've consulted many legal specialists. The idea is to forbid speculation from banks without affecting partners working with producers," he said.