Bloomberg News

Sarkozy Says Food Price Surge Is ‘Plague’ That Needs Action

June 23, 2011

(Adds Standard Chartered’s comments from eighth paragraph.)

June 23 (Bloomberg) -- World food prices that rose 37 percent in a year, driving 44 million more people into poverty, are a “plague” that need action from world leaders now, French President Nicolas Sarkozy said.

Group of 20 farm ministers are in Paris for the second day of a summit. France, which holds the G-20 presidency, wants a central database on crops, limits on export bans, international market regulation, emergency stockpiles and a plan to raise global output. The proposals to limit export curbs and start a database will be “especially sensitive,” French Agriculture Minister Bruno Le Maire said last week.

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 the World Bank says put 44 million more people into poverty since 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.

“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.”

A lack of transparency in agricultural markets is exacerbating price swings, threatening economic recovery and food production, Sarkozy said.

“We have to act, and act together,” the president said. “The world is watching you.”

‘Century of Hunger’

World leaders risk making this “the century of hunger” unless they can agree to new rules on food supply, Le Maire said before the meeting. France’s position on the main proposals being put to the G-20 ministers is that either all are agreed on or there is no accord, Le Maire said in an interview with Bloomberg Television on June 20.

“Transparency is an issue,” Abah Ofon, a Singapore-based analyst at Standard Chartered Plc, said in an interview with Susan Li on Bloomberg Television’s First Up. “The market isn’t giving enough signals to farmers and stakeholders” to boost production to make up for potential losses to crops in importing countries, he said.

The ministers will most likely balk at the proposal on trade restrictions, said Robert Carlson, international relations director at the Washington-based National Farmers Union.

‘Tough One’

“That’s going to be a tough one,” Carlson said in an interview in Brussels. “Probably the last thing you get agreement on is the agreement to let somebody else control the borders of your country.”

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

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. There will be shortages in corn, wheat, soybeans, coffee and cocoa this year or next, according to Utrecht, Netherlands-based Rabobank Groep. Prices also rose after droughts and floods from Australia to Canada ruined crops last year. European farmers are now contending with their driest growing season in more than three decades.

‘Corn And Yields’

“In terms of supply, there’s been some concerns in Europe, in southern U.S. Plains, in northern plains in China,” Standard Chartered’s Ofon said. “We’re concerned about corn and yields and acreage.”

Growth in agricultural output will slow to 1.7 percent a year through 2020, compared with 2.6 percent in the previous decade, the United Nations’ Food and Agriculture Organization and Paris-based Organization for Economic Cooperation and Development said in a report this month.

While Standard Chartered forecasts global wheat production will expand, prices may still be sustained at current levels as “demand surges back into the market,” Ofon said.

France will sign only an agreement that includes regulation of financial markets for agricultural commodities, Le Maire said. The details will be discussed by G-20 finance ministers later this year, he said.

“A market that is not regulated is not a market, it’s a lottery in which fortune smiles on the most cynical, instead of rewarding hard work, investment and the creation of value,” Sarkozy said.

--With assistance from Luzi Ann Javier in Manila. Editors: Jarrett Banks, Jake Lloyd-Smith

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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