Bloomberg News

G-20 Agrees Agriculture Plan to Tackle Food-Price ‘Plague’

June 23, 2011

(Adds comment from Le Maire from third paragraph.)

June 23 (Bloomberg) -- Group of 20 farm ministers agreed to an action plan to set limits on export bans and create a crop database to tackle what French President Nicolas Sarkozy called the “plague” of rising food prices.

The agreement includes a call for international market regulation, more agriculture production and the development of a proposal for emergency food reserves, the ministers said in a declaration after a two-day meeting wrapped up in Paris today. Food for humanitarian purposes will be exempt from export bans, they said.

“The plan agreed this morning is a victory against hunger in the world, a victory for farmers in the world,” French Agriculture Minister Bruno Le Maire said at a press conference after the meeting.

Wheat as much as doubled in the past year as Russia and Ukraine curbed exports after drought decimated crops, adding to record global food prices, which according to the World Bank have put 44 million more people into poverty since last June. Nations will spend $1.29 trillion on food imports this year, the most ever and 21 percent more than in 2010, the United Nations estimates.

The G-20 countries account for 65 percent of all farmland and 77 percent of global grain output, according to a statement on the website of the G-20 presidency.

Food Database

The database on food stocks and production forecasts will be developed “rapidly” within the UN’s Food and Agriculture Organization, Le Maire said.

“Volatility is a plague on farmers and consumers,” Sarkozy said in a speech to the ministers yesterday. “It can plunge entire populations into famine and poverty.”

More information on physical markets may allow policy makers to predict the next food crisis, and give a signal to farmers to lift production, according to Shenggen Fan, director general of the International Food Policy Research Institute, which aims to end hunger and poverty.

“Without transparent information the market will never work,” Fan said in an interview after today’s meeting.

The last time prices surged, from 2007 to 2009, more than 60 food riots occurred worldwide, according to the U.S. State Department.

Volatility

“The lack of information about stocks and availability can lead to price spikes,” Robert Zoellick, the president of the World Bank, said in a press conference after the meeting. “Uncertainty feeds volatility.”

Corn futures advanced 77 percent in the past 12 months in Chicago trading, a global benchmark, rice gained 39 percent and sugar jumped 64 percent.

The planned information system might have avoided the jump in rice prices in 2008, after the Philippines failed to fill a tender for the grain, Zoellick said.

China and India, which had considered information on stockpiles and production as “national security information,” are now willing to develop the capacity to make data available, Zoellick said.

“This information is particularly important for the most vulnerable,” Zoellick said, adding those countries can find themselves shut out of international markets.

Regulation of financial markets for agricultural commodities will be deferred to a meeting of the G-20 finance ministers this year, Le Maire said. The farm ministers in their declaration said they “strongly encourage” their finance colleagues to move ahead with regulation.

Biofuels

“We all recognize, on the G-20 country level, the need to have regulated agricultural markets,” Le Maire said. “Strong encouragement, that is the term we used in the framework of this action plan.”

Ministers should have addressed biofuels policies and steps to help poorer countries build up inventories, Oxfam International said. Le Maire said last week the subject of biofuels “isn’t ripe” for agreement between G-20 countries.

“Biofuel definitely affects food prices,” Fan at IFPRI said, adding the topic is controversial and will continue to be studied.

The G-20 agreement lacks measures that would have an immediate effect on reducing hunger, Thierry Kesteloot, a policy adviser at Oxfam, an international charity, said on the phone from Brussels. The market-information system will require grain- trading companies to share data to be reliable, he said.

“The grain market, especially wheat, is a very concentrated market,” Kesteloot said. “We won’t have transparent information without including the private sector, and there a simple invitation is probably not enough.”

The World Bank’s Zoellick said the agreement is a “very good start” to tackling the food-security issue. “It’s too early to make a victory lap,” he said. “Today is about solid progress. The world is hungry for food, but it’s also hungry for action.”

--With assistance from Luzi Ann Javier in Manila. Editor: Sharon Lindores, John Deane

To contact the reporters on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net; Tony Dreibus in London at tdreibus@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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