29 June 2011

After G20 agriculture talks culminated in the agreement to set up a global grain database to increase transparency and thereby limit price volatility in agricultural commodities, ministers now face the task of ensuring compliance; China and other emerging countries have proven reluctant to reveal their actual supply needs in key staples.

The data initiative; the Agricultural Market Information System (AMIS), announced at the first-ever meeting of G20 farm ministers held last week in Paris, would see monthly reports made on production, consumption and stocks of key grains. However, it has been revealed that emerging giants including China and India are reluctant to commit to this level of transparency.

Furthermore, The Washington Post’s Chuin-Wei Yap, pointed out, “China’s track record suggests that its disclosures to this imminent G20 database will shed little light on the country’s true needs.”

Francois Luguenot, chief market analyst at France’s InVivo, commented, "China knows full well that the day when their stock levels are published every month, they will be scrutinised in minute detail and that could make the market react violently. If over time, in five or 10 years the Chinese change their way of operating, why not. But for the moment what they would have to lose in disclosing their stocks is far above what they would gain in opening up."

The G20 discussions have already attracted strong criticism as, although resolutions were made to end export restrictions on food destined for humanitarian aid, the overall outcome of the talks was seen as ‘watered-down.’ The agreements fell far short of French President, Nicholas Sarkozy’s promises of increased regulation to stabilise commodity prices.

Difficulties in execution

In fact, observers have stressed there is too little detail on how the programme would be organised and funded to avoid it becoming what Reuters described as “yet another laudable but ineffective pledge to improve the global food system.”

Countries such as China, India and Russia face the double edged-sword of wanting to protect their own politically sensitive food policies from market forces but also the practical difficulties of surveying extensive territories.

French farm minister Bruno LeMaire orchestrated last week's initiative on behalf of France, which holds this year’s G20 presidency. He said AMIS could work, as China and India could benefit from support in data collection from more experienced partners like the United States.

Nevertheless, the initiative has been slated by those who say pooling farm data relies too heavily on cooperation from private trading houses and the main objective of reducing volatility may be naive, as access to extra data could prompt further market reactions.