FAO sees crop concerns driving higher food prices – http://www.commodities-now.com
(Reuters) – The government does not believe speculators have played a central role in creating volatility in food commodity markets and sees little value in more regulation, farming minister Jim Paice told Reuters in an interview on Wednesday.
Nicolas Sarkozy, president of France which currently chairs the G20 group of developed nations, on Tuesday called for tighter controls on the speculators he blames for spiralling food and energy prices, spelling out reforms to put more trading under the thumb of regulators.
G20 agriculture ministers are meeting in Paris next week to discuss French proposals which include calls to encourage investment in agriculture and increase market transparency.
“We are not persuaded that speculation is the fundamental problem (causing volatility). Speculators are in all markets… and although you can’t say they have no role to play, we don’t think it is very significant,” Paice said.
Britain will be represented in Paris by Caroline Spelman, who heads the UK farming and environment ministry. Paice is the member of her ministerial team responsible for agriculture.
“Caroline will be going there with an open mind really as to see what ideas and proposals come forward to address volatility. But we don’t think massive regulation of speculators is either necessary or would make a huge amount of difference,” he said.
Paice, however, said Britain’s welcomed France’s initiative and backed some other measures such as proposals to increase market transparency.
“We strongly support the French government’s desire to look into the whole issue of volatility in food markets and agricultural markets. We think there is an issue there that is not in the interests of farmers or the consumer,” he said.
“Most people would agree that transparency is good. It will reduce volatility because people will actually know what the truth is rather than various rumours which get about. We strongly support transparency,” he said.
Paice also said meeting rising global demand driven by population growth and changing diets would be a challenge, particularly given climate change.
He said Britain’s approach was based on encouraging farmers to grow what consumers need and promoting freer trade.
“We believe that ultimately is the other way to bring about the increase in production we need,” he said.
Paice ruled out following the French lead in providing support for livestock farmers following a drought in north-west Europe this year.
France’s government has said it will pay out several hundred million euros to compensate farmers hit by its driest spring in 50 years, chiefly livestock breeders who face high feed costs.
“It is not clear what the French have done, and indeed whether what they have talked about doing is legal. We have doubts about that,” Paice said.
“Clearly given the financial situation the country is in we are not in a position to provide funding for farmers in difficulties. That is a matter for their banks to help them in the tough times,” he said.
Paice also said recent rains will have done little to help cereal crops in Britain.
“We are still in a very difficult situation. For the cereal crops it is too late frankly. Overall the damage is largely done on grain yields,” he said.
“As far as livestock is concerned, some parts of the country are going to be shorter of hay and sileage for the winter and indeed straw. That will obviously impact on them but there is not a lot the government can do I’m afraid.”
Humphrey Feeds Comment: We would stand somewhere between the two views; the prices rises are not all down to speculators, but certainly speculators exaggerate the movements.