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Deal to curb food price volatility in sight.

G20 members were on the verge of signing an agreement recently over measures to curb volatility in staple food prices after late-night talks yielded progress in the first-ever farm meeting of the Group of 20 major economies.

The final wording of the agreement was still to be decided by ministers at a last session, and sources close to the negotiations expected the deal to tread carefully on divisive issues like market regulation and biofuels.

"It is agreed at the working level but ministers are ministers so they will still have a debate," one source close to the talks said ahead of the final session.

A source close the French G20 presidency said that the wording of the text was "still evolving at this very minute" and that ministers will have several versions to review on the key sticking point of market regulation.

France is keen to crown agreement on areas such as data transparency and policy coordination with firm proposals for regulating commodity derivatives, but partners including Britain remain opposed to stringent controls on financial markets.

French President Nicolas Sarkozy urged G20 farm ministers 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 percent 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.

But France has faced stiff opposition on regulation issues from Britain, home to Europe's biggest financial market hub.

London has played down the role of speculation in market upheavals, putting the focus on raising farm production and passing on the sticky issue of regulation to G20 finance ministers, who are due to meet in September.

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.

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Publication:Saudi Economic Survey
Date:Jun 29, 2011
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