Brazil has come around to back France’s proposal for increased regulation of commodity markets which have bumped food prices to record highs this year, the agricultural giant’s farm minister said April 7.
France is seeking the support of the G20 group of wealthy and developing economies for a series of reforms intended to help stabilize food prices by buffering the cycles of peaks and troughs that are common in exchange-traded commodities.
“We agree exactly because the French proposal was initially interpreted by some producing countries, including by us, Argentina and the United States, as if it had a component of price control,” Wagner Rossi told reporters after meeting his French counterpart, Bruno Le Maire.
“That isn’t there. The minister was very clear in saying that any control would be over financial manipulation in the agricultural produce market,” he said, noting that measures would seek to reduce the extreme price swings of recent years.
Brazil’s backing could give an immense boost to France’s efforts. As the world’s top producer of beef, sugar, orange juice and cof fee, Brazil is one of the nations with most at stake should changes be made to how farm products are traded.
Still, Brazil has not abandoned its previous position that raising output is the most effective means of controlling price spikes in farm products, Rossi said.
“We have always defended this view,” he said.
Le Maire said speculator-driven price spikes in farm products often hamper producers by setting up boom and bust scenarios similar to the property market bubble that burst in 2008 during the global financial crisis.
“(Price movements) need to be less sudden and with smaller jumps,” Le Maire said.
The United Nations Food and Agriculture Organization (FAO) said on April 8 that global food prices could rebound again after slipping from record highs in March.
Le Maire will travel to China and the United States to promote France’s proposals prior to a meeting of G20 agriculture ministers in Paris in June and was confident that members were nearing a consensus on the issue.
He said a sharp rise in grain prices had played a role in triggering the recent wave of violence in North Africa, underscor ing the need to dampen price volatility.
“We don’t want to control prices. We want to avoid a situation in which … a tonne of wheat goes from 115 euros a tonne to 300 euros from August 2010 to December 2010,” Le Maire said.
Financial market regulation has been the most divisive of the French proposals, but there has been broad agreement over expanding market intelligence through a global database of output and stocks to help prices better reflect fundamentals.
Other proposals include limiting positions on futures trades, openly identifying traders as producers or speculators and creating a register for over-the-counter trades, to increase transparency.
France has put commodities market regulation at the top of its agenda for its stint as the head of the Group of 20 economies. It blames speculation for exacerbating a surge in prices of food staples in the last year.