Agriculture ministers from France and South America have moved towards an accord on a ‘plan of action’ against financial speculation on food commodities.

“I feel that we are currently making progress towards a consensus on a plan of action which could be adopted in the meeting of G20 Agriculture Ministers,” French Agriculture Minister, Bruno LeMaire, announced on Thursday (19^th May).

 Speculation or lack of production?

The Argentinean minister for economy, Amado Boudou, Acknowledged that, "the volatility of commodity prices had its origin in the short term financial game played by speculators, which undoubtedly needs more regulation.” He also acquiesced that “We are agreed upon that much.”  The ongoing ministerial debates continue today, for the second consecutive day, in Argentina over whether or not ministers should step in and regulate the market.

Agriculture is a priority of the French G20 presidency. However, over the last few months, emerging economies such as Brazil and Argentina, have warned France against any attempt to limit agricultural prices.

Hunger riots

The Argentinian Government believes that the problem lies in a lack of raw materials and that the answer lies in increasing the supply, rather than regulating prices. In ten years, with the global population expected to reach 9.2 billion, they, along with the FAO and the G20, believe food production must be raised by 70% in order to avoid ‘hunger riots.’ However, this view is in contrast to research such as that reported by Vaclav Smil in his book Feeding the World, which reveals that inefficiencies in the supply chain account for much of the loss and inequality of distribution of raw materials.  

No limitation on Prices

On Thursday, M. LeMaire reaffirmed that France had no intention of limiting prices. He said, “France does not wish in any way limit the prices of agricultural materials; if prices rise, so much the better for the producers, what we want to fight it is the excessive price volatility and financial speculation on raw materials.”

LeMaire’s Argentinian counterpart, Julian Dominguez announced that "the clarification of the French Minister [was] very important.” The French Minister replied that, “We have come to an Accord on the main thrust of a plan of action.”

The five points of the plan involve “reinvesting in agriculture in order to gain agricultural autonomy, establish a joint database for a more transparent approach, create a ‘rapid response’ mechanism in case of crises, address price volatility for those countries most vulnerable by setting aside emergency humanitarian reserves and adopting the same regulatory tools as the other financial markets.”

The plan will be presented at the end of June by the French leadership at a meeting of the G20 Agricultural ministers, the aim of which will be to coordinate the policies of industrialized and emerging countries, before a summit of heads of state and government in November in Cannes.

The global food price index has risen again since summer 2010. The increase slowed between March and April, but the index has shown an increase of 36% year on year, according to FAO.