While the G20 nations agree the world needs more affordable food, they are divided on how to achieve this goal: whether to tame prices through regulation or increase agriculture production - or both.

Agriculture ministers meeting in Paris hope to iron out their differences amid surging demand for food and biofuels that is putting upwards pressure on farm prices expected to remain high for years to come.

Their meeting is seen as a preparation for the November summit at which G20 leaders hope to agree to concrete steps to reduce food price volatility in agricultural commodities.

Calls for tighter regulation

Agreement is expected on the launch of an agricultural market information system to share key data on global stocks and production. The initiative comes as the world economy battles a food price shock due to production shortfalls, strong demand and speculators pushing prices higher.

But France wants far more to come out of the meeting than just an agreement on a food stock database. The country has made tighter regulation of commodity markets a top priority of its G20 leadership, which ends with the November summit. French President Nicolas Sarkozy blames speculators for the food price inflation, which, among other things, has caused unrest in parts of Africa and the Middle East.

The French proposal envisions putting a lid on how much of a market an investor can buy into or imposing a minimum cash deposit for commodity derivative transactions. It also calls for greater transparency of who is making the transactions.

Even some commodities experts, like Frank Neidig at Bankhaus-Lampe in Düsseldorf, admit to a problem with speculators. Neidig notes that while crop growers prefer to lock into fixed prices and play it safe, other stakeholders like to gamble and haul in the profits. Markets, he said, are becoming increasing crowded with speculators "who are the least bit interested in real grain deliveries."

French idea

The French idea, however, has yet to win the support of the United States, the United Kingdom and several other countries that believe speculation isn't the cause for the high food prices. Many of them argue against regulation in favour of measures to increase agricultural output through investments and the use of new technologies.

Ralf Südhoff, director of the Berlin office of the United Nations World Food Program, argues that " a little bit of everything" is needed to avoid a food crisis. "We need to establish greater transparency and larger reserves," he told Deutsche Welle. "And we need to dramatically increase production in developing countries in a sustainable way and get speculators under control to calm markets and avoid price swings."

Südhoff said G20 agricultural ministers will discuss the establishment of regional reserve centers to respond to food needs in emergency cases and ways to increase food production in developing countries. But whether France, he added, can garner support for its proposal to curb speculation remains to be seen.

The clock is ticking. The United Nations' Food and Agriculture Organization projects that the world will need to produce 70 percent more food by 2050 to feed its population and that food prices already this decade will be 30 percent higher than in the previous decade.

The need for more affordable food is real. That's a fact G20 leaders will need to swallow fast.

Author: John Blau
Editor: Thomas Kohlmann