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G20 Plans Response to Rising Food Prices

Javier Blas, Commodities Editor
Sunday, 12 Aug 2012 | 7:02 PM ET

G20 countries are to step in to try and co-ordinate a response to surging food prices, after the worst US drought in half a century devastated crops in the world’s largest agricultural exporter.

A rotting ear of corn sits on a struggling corn plant in a drought-stricken farm field.
Getty Images
A rotting ear of corn sits on a struggling corn plant in a drought-stricken farm field.

The conversations behind closed doors among senior G20 and UN agriculture officials about calling a session of a new emergency forum come after the cost of corn, or maize, surged to an all-time high, surpassing the level seen during the 2007-08 food crisis.

The US government on Friday stoked the fears of a price surge, saying the drought had forced the country’s farmers to abandon cornfields covering a larger area than Belgium and Luxembourg combined. The Department of Agriculture slashed its forecast for the crop and predicted record prices over the next year.

And when Barack Obama arrives in corn-growing Iowa for a three-day tour on Monday, he will be entering a fierce debate in the run-up to the presidential election on whether the grain is worth more as food or biofuel.

G20 officials plan to hold a conference call in the week of August 27 to discuss a meeting, which could be held in late September or early October, according to four officials familiar with the conversations.

The meeting would be the first of the Rapid Response Forum, a newly created body to “promote early discussion among decision-level officials about abnormal international market conditions”. The forum is part of the G20-backed Agricultural Market Information System, created last year at the initiative of France and seen as a key policy response to the 2007-08 crisis.

Leading G20 countries are “in favor of holding a meeting” as crop conditions continue to deteriorate in the US, one of the officials said.

G20 officials emphasized the planned meeting was not a sign of panic. On the contrary, they said, it would be an attempt to avoid the kind of policies, including export restrictions and hoarding, that in 2007-08 transformed a shortage of agricultural commodities into the first full-blown food crisis in 30 years with riots in two dozen countries.

“In many respects it is just making sure everyone is on the same page in terms of what the situation is, and certainly trying to discourage any policies that would exacerbate the volatility,” one G20 official said.

The UN is likely to use the meeting to push for a global debate about biofuel policies, particularly asking the US, the EU and other countries to scrap government-mandated production targets.

Agriculture policy makers are increasingly worried after the cost of corn, soyabean and wheat has surged between 30 and 50 per cent since June.

Arif Husain, deputy head of vulnerability assessment at the World Food Programme in Rome, said: “This is the third price shock in the last five years.”

But policy makers are comforted by several factors. One is that the price of rice, a key commodity for food security in Asia, remains stable; another is that production of local African staples such as cassava has increased significantly over the past five years as countries boost their food security. Global demand is also less strong than in 2007-08 due to the impact of the financial crisis in economic growth, and countries have avoided beggar-thy-neighbor policies such as export bans and panic buying.

Additional reporting by Gregory Meyer in New York and Jack Farchy in London

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