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Information And Transparency Key To Market Stability

France’s presidency of the Group of 20 nations should focus on promoting transparency on agricultural data worldwide, and not so much regulation, speakers said at the Reuters Global Food and Agriculture Summit.

France has blamed financial speculation in commodity markets for the surge in prices for food staples, and has called a meeting of G20 agriculture ministers at the end of June to discuss concrete measures to curb price volatility.

A limit on investors’ positions, creating ID cards for market operators or regulating over-the- counter trades are among the key measures in French President Nicolas Sarkozy’s G20 agenda.

Among other proposals, France has also suggested creating a database on agricultural production, consumption and stocks from governments and international organizations.

“We need more information, more transparency, more widespread understanding of the fundamentals,” said Ken Ash, director of trade and agriculture at the Organization for Economic Co-operation and Development (OECD). “Then if people wish to react or overreact they do so with good information, but we need to begin with that good information.”

Overly burdensome regulation could risk draining liquidity out of commodity markets, and eventually reach the wrong target.

“The losers (of overregulation) would be farmers,” he said.

Jean-Pierre LangloisBerthelot, head of France’s cereals export lobby, also said regulation by price was working and that market distortions could be addressed through more reliable data on supply and demand.

“We have to have a very open market, a very transparent market where all the players know the rules,” he said.

Experts also questioned the idea of building stocks in import-dependent countries.

“Our advice on stocks (as a measure) to calm markets is: Don’t go near them,” said Ash, who deemed stocks unmanageable.

Langlois-Berthelot said high costs, the difficulty of preserving grain in non-temperate climates, and the risk of fraud, made this solution unrealistic. More transparent data sharing would work “a lot better,” he said.

A physical transfer of food commodities when needed could be an option though, French academic Philippe Chalmin said.

“I don’t think pre-positioned stocks are technically feasible. It’s going to cost an arm and a leg while it’s not hard to move wheat,” said Chalmin, who also advises French Prime Minister Francois Fillon on commodities and food issues.

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