Market Volatility More Critical Than Rising Food Prices: CFA President

Don’t blame farmers for rising food prices, says the leader of Canada’s largest farm group.

Farmers are only price-takers and have little influence over how market forces influence commodity prices, said Ron Bonnett, Canadian Federation of Agriculture president.

The real issue isn’t high consumer prices so much as it is volatility in the marketplace, he said.

Bonnett spoke on the eve of a G20 agriculture ministers’ meeting in France. He was one of over 500 representatives from 120 farm organizations in 75 countries summoned by the French government and the country’s farm groups to provide advice to the meeting.

Price volatility, climate change and the need for sustainable growth were key items on the G20’s agenda.

But wild swings in the marketplace and the need to stabilize price fluctuations dominated much of the discussion by farm groups, said Bonnett, reached by phone in Paris.

He said producers are often frustrated by traders “who can punch a button on a computer and make more out of a tonne of wheat than the farmer who grew it.”

Bonnett recognized commodity prices are generally robust right now. But that doesn’t mean farmers are making piles of money, he added.

High input costs take a big chunk out of farmers’ margins and severely limit their returns, said Bonnett, noting the price of fuel alone since last winter has increased 25 to 30 per cent.

He acknowledged food prices are rising worldwide but said they reflect the rising cost of growing that food.

“Higher food costs recognize it’s costing more for farmers to produce food and food is likely going to get more expensive.”

Bonnett said farmers want G20 ministers to look for ways to take the volatility out of markets, such as happened in 2008 when a huge grain price spike and a sharp drop shortly afterwards distorted market signals.

Another example was a “knee-jerk” reaction by the Russian government last year to temporarily ban grain exports after drought and fire devastated crops. The announcement sent wheat prices to a 23-month high.

Many commodity analysts blamed speculators for driving wheat prices artificially high to make quick profits.

Russia had hoped to secure its own wheat supply by banning exports. But now that prices have since backed down, Russian farmers are reportedly switching to other crops instead, Bonnett said.

He said producer groups hoped to impress on the G20 that farmers must be central to the discussion on food production policies.

And he stressed that decision makers should not confuse rising food prices with price volatility in a world where the demand for food is constantly growing.

“If we’re going to meet demand in the future, farmers have to have profitability on their farms. And with that, prices are going to rise.” [email protected]

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