Market deregulation since 1999 has fuelled speculation on commodities markets, and that needs to be corrected to curb food price volatility, the head of the United Nations’ Food and Agriculture Organization said Thursday.
“We have created an environment that allows pure speculation,” FAO director general Jacques Diouf told Reuters Insider TV shortly after the agency said its closely watched Food Price Index had climbed to a record high in January.
“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 had existed until 1999, he said.
“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.”
The global market for agricultural commodities was “neither free nor fair,” he said, 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 US$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.
“Unless we invest in agriculture… we will not have a situation that will preserve us from the shocks of tight supply due to climate change in particular,” Diouf said.
Turning to foreign land purchases by private companies and governments of food-importing countries, Diouf said it was necessary to ensure these land deals were fair, transparent and benefitted local communities and not just those investing money.
The FAO, along with other international organizations, has been working on drawing up a set of principles for “responsible” investment in farmland. Diouf said negotiations on those guidelines were at an advanced stage.