Market deregulat ion since 1999 has fuelled speculation on commodities markets, and that needs to be corrected to curb food price volatility, the head of FAO said Feb. 3.
“We have created an environment that allows pure speculation,” FAO director general Jacques Diouf told Reuters Insider.
“This is something that would require the necessary corrections to allow still-normal operations but not unlimited speculation leading to great volatility in prices,” he said.
“I am calling for going back to the regulation that existed (until 1999).
“Buying on the future markets … buying only the contract and reselling it at higher prices without even seeing the commodities, that is what is not right.”
He said the global market for agricultural commodities was “neither free nor fair,” with trade barriers and subsidies in advanced economies distorting the demand and supply balance and hurting farmers in poor countries.
“It is not normal that OECD countries can provide every year an average equivalent support of $365 billion to their farmers,” said Diouf.
“I am not saying that farmers should not be supported – all farmers in the world, both developed and developing countries. But it has to be done in a way that is not distorting to the market and in a way that is also not jeopardizing the livelihood of poor farmers.”
The FAO says the world needs to invest $83 billion a year in agriculture in the developing world and raise overall output by 70 per cent over the next 40 years to feed a global population of 9.1 billion in 2050.