G20 farm ministers struck a deal yesterday (23 June) to tackle high food prices, agreeing to a watered-down declaration that fell short of France's ambitious proposals to tighten regulation of commodity markets.
"The member states of the G20 concluded an agreement this morning on an action plan on volatility of food prices and global agriculture," French Farm Minister Bruno Le Maire told journalists after chairing the meeting.
A communique was not immediately available, but a G20 source said it urged finance ministers of the Group of 20 major economies to improve rules and supervision of commodity markets.
The deal appeared to lack, however, a commitment for a tough crackdown on speculators that French President Nicolas Sarkozy had campaigned for in the run-up to the summit, the first-ever G20 agriculture meeting.
"We recognise that appropriately regulated and transparent agricultural financial markets are indeed key for well-functioning physical markets," the communique said, according to the source.
"On this basis we strongly encourage G20 finance ministers and central bank governors to take the appropriate decisions for a better regulation and supervision of agricultural financial markets," it added.
World food prices hit a record high earlier this year, reviving memories of soaring prices in 2007-2008 that sparked riots in developing countries, and giving fresh urgency to debate about how to improve a global food system that leaves some 925 million people hungry.
France had wanted all G20 countries to commit themselves to imposing position limits – a curb on how much of the market an investor can buy into – but the G20 source said the communique only said reforms could include trading limits.
The action plan includes increasing agricultural output, improving market transparency through a new database and removing export restrictions for food aid, Le Maire said.
France, which heads the G20 this year, was keen to crown agreement on areas like data transparency and policy coordination with firm proposals for regulating commodity derivatives, but partners like Britain had so far remained opposed to stringent controls on financial markets.
UK Agriculture Minister Caroline Spelman told Reuters on Wednesday that Britain backed efforts to improve regulation but said it was up to G20 finance ministers, not farm ministers, to come up with concrete measures.
Paris has taken a hard stance on negotiations in recent days, saying it would not sign a half-hearted agreement as it pushed for an ambitious deal that would boost Sarkozy's profile 10 months before a new presidential election.
Under the deal, G20 members agreed to exclude humanitarian aid from export restrictions, US Agriculture Secretary Tom Vilsack said in a statement.
G20 members had committed to getting the deal approved under World Trade Organisation rules, a source close to the talks said.
The scope of commitments on regulation and other divisive issues like biofuels and emergency food stocks would be limited, however, other sources had said.
Brazil, a major producer of sugar-based ethanol, has been staunchly opposed to suggestions that biofuels contribute to rising food prices, while the United States has been sceptical about the idea of developing food stocks for humanitarian purposes.
"There will be some sentences about biofuels but these will be about the need for more studies, research, not really trying to introduce a drastic new approach," said a source, who was involved in last night's discussions.
Sarkozy had urged G20 farm ministers on Wednesday to adopt France's proposed action plan, including a tough line on speculators whom he blames for driving up food prices and fuelling political upheaval in some countries.
"A market that is not regulated is not a market but a lottery where fortune favors the most cynical instead of rewarding work, investment and value creation," he said.
European wheat prices tumbled 7% on Wednesday (22 June) amid signs of intense competition on export markets, giving fresh evidence of market volatility which France sees as not justified by physical supply-and-demand factors.
EURACTIV with Reuters
Caroline Spelman, UK Secretary of State for the Environment, Food and Rural Affairs, said: "This has been a very successful first meeting of G20 Agriculture Ministers with the UK securing a number of significant outcomes in the final text [...] if the plan is implemented quickly and effectively it will go a long way to creating a more predictable world for food producers and consumers alike in both developed and developing countries."
She was echoed by Rosa Aguilar, the Spanish agriculture minister, who said that "the G20 action plan constitutes a good starting-point with political commitment and concrete action which allow for greater international coordination when it comes to facing and preventing future food crises".
According to Adriano Campolina, country director of ActionAid Brazil, "in 2009, the G20 showed it can arrange massive bailouts for bankers, but now it's demonstrating it has no will to stop the looming food crisis that will hit the poor the hardest".
"ActionAid will continue mobilising to hold President Sarkozy to his promises on global food security by the November G20 summit despite the agriculture ministers' failure," he added.
Tom Vilsack, the US Agriculture secretary, noted that the "consensus reached today by the G20 agricultural ministers marks an historic union of resolve in combating the pressing challenges of hunger and food price volatility confronting our world with greater regularity".
"In the end, this agreement is only as good as the actions we take together to aggressively confront food security's difficult challenges, but our cooperation as reflected today is a significant achievement for the nearly one billion people grappling with hunger each day."
EU Farm Commissioner Dacian Ciolos described the results as "a good step forward". "But I and the Commission would have liked [the agreement] to go a bit further," he added.
"On that question [of financial regulation], I think all countries have to take the necessary steps themselves. If countries don't do it themselves, it will be very difficult to achieve at international level, as all financial markets are regulated at national or regional level," he added.
Oxfam's Jean-Cyril Dragorn said that "fixing the global food system and ending the food price crisis requires major surgery yet the G20 produced little more than a sticking plaster".
"Agriculture ministers agreed to address some of the impacts of high and volatile prices but failed to introduce the measures needed to prevent prices spiraling out of control in the first place."
"Crossing our fingers and hoping the crisis will go away is simply not good enough when millions of people are going hungry because of high and volatile food prices. Only by getting to grips with the problems - reforming flawed biofuels policies which divert food into fuel and helping poor countries build up buffer stocks to cope with extremes in food price volatility - will they solve this problem," Dragorn said.
Josette Sheeran, executive director at the World Food Programme, said: "The Action Plan affirms and strengthens the capacity of WFP and others assessing and responding to food crises, while building the capacity of nations and peoples to better manage risk and meet their own food and nutrition security needs."
"WFP applauds this historic agreement and strong Action Plan provisions that can ensure the hungry have access to food through WFP in emergencies by removing export barriers or extraordinary taxes for humanitarian food and promote broad global support for similar action through UN agencies and the World Trade Organisation," she added.
Fears of a repetition of the 2007-08 food price crisis were sparked earlier this year with the publication of the United Nations' latest food price index, which showed a 32% rise in wholesale prices of agricultural commodities in the second half of 2010.
G20 farm leaders have worked on new rules to curb commodity price volatility, warning that the world risks food riots and weaker growth if leaders fail to act.
Yesterday (23 June) they settled a deal to curb volatility in food prices, falling short of France's ambitious plans to impose tough new regulations on speculators, but agreeing to boost transparency with a new database.