The youth wing of the Socialist party is promoting the initiative, which would ban banks, investment funds and trading companies having their headquarters in Switzerland from investing in financial instruments tied to food commodities.
Speculating in basic foodstuffs can distort prices and lead to famines and poverty around the world, according to the proponents of the initiative, backed by a coalition of humanitarian, farming, religious and political groups.
Speculation causes volatility in food prices, which also hurst Swiss farmers, who lost 100 million francs in 2010 because of artificially created market conditions, the initiative's backers say.
But Johann Schneider-Ammann, Swiss president and economic affairs minister, told a news conference in Bern that the initiative, to be decided by citizens in a national referendum on February 28th, would be ineffective and harmful for the Swiss economy.
If adopted “this would be of a very problematic nature for Switzerland,” Schneider-Ammann said, according to a report from German-language broadcaster SRF.
A link had not been established between speculation and rising prices for food, he said.
He said other causes, such as natural catastrophes, floods, drought and political decisions provoke spikes in agricultural prices.
Schneider-Ammann said the initiative would penalize the Swiss financial industry and could lead businesses to leave Switzerland by creating uncertainty about the general business climate.
He said he favours combatting poverty and poverty around the world but through such means as development and humanitarian aid.
His department issued a statement stating that the initiative in Switzerland "would have virtually no effect on the global trade in agricultural derivatives".
But monitoring it would be costly given the many companies in Switzerland that act internationally in agricultural commodities, the department said.
"In addition, Swiss insurance companies, banks, pensions funds and other companies are active in the trade of agricultural derivatives."
These companies would be negatively impacted by the initiative because they would have to be monitored by an elaborate bureaucracy, with accompanying administrative costs, the department said.
It added that numerous studies, including those from the OECD and the International Monetary Fund, deny any link between speculation and food price volatility.