||The G20 on Agriculture: A step in the right direction
By Dominique Lasserre,
expert of momagri
Momagri welcomes efforts made by the French authorities who have placed agriculture and its issues on the centre stage. Particularly as only a few months ago, the subjects of volatility, regulation and governance were being ignored. Also, for the first time, the G20 has laid down principles for international cooperation for agriculture and food in view of fighting agricultural price volatility and improving food security.
We regret however the lack of position on certain issues such as the causes of price volatility, the need to regulate physical markets and the agricultural policies that protect farmers from excessive price volatility.
But was it possible to take things further in such a short period while taking into account the different interests at stake? Maybe not, there is a lot of ground to cover! Furthermore, this is a new approach to the functioning of agricultural markets and institutional methods of global governance to effectively combat price volatility and ensure the sustainable development of agriculture throughout the world.
Meanwhile the five points proposed in the work plan adopted by the G20 on agriculture should be implemented to reverse the longstanding commitment towards the unregulated liberalization of agricultural markets. And this, particularly since the final paper at the G20 on agriculture always mentions “the need conclude Doha Round for Development”.
The months ahead will therefore be crucial to give consistency to the Ministerial Declaration on the Agricultural G20. Our think-tank, momagri, will continue its reflection and proposals to contribute along with other civil organizations to the emergence of this new governance for agriculture and world food.
Summary presentation of the Ministerial Declaration
Action Plan on food and agricultural price volatility
The action plan on food and agricultural price volatility, resulting from the Agricultural G20 is structured around the five following points:
These guidelines are in line with the recommendations made by momagri since its creation in December 2005. Recently, again, at the 2011 Dakar Agricultural Forum, we called for a monitoring, warning and crisis management system, in view to effectively fighting agricultural price volatility and increasing food security (please see. the 2011 DAKAR DECLARATION).
- Production and agricultural productivity
- Information and transparency in agricultural markets (production + stock)
- International coordination
- Reducing the impact of agricultural price volatility for the most vulnerable
- Financial regulation [for trading in agricultural commodities]
Transparency in both agricultural and physical markets as well as international coordination are in effect prerequisites to any definition of regulatory tools and an efficient implementation.
Each of these five points are real challenges in their own right and pose many questions which, depending on the answers provided, will give a different form to the future of our food, environment, territories and society .... but also more globally, the balance between the nations on the international stage.
Thus and according to momagri, we must be vigilant on the following points:
On “production and agricultural productivity”, the text stresses the importance of increasing production and productivity through research and innovation, but it does yet give the details on the means to achieve an increase of 70% in agricultural production over the next forty years.
At a time when the parallels between agriculture and energy are increasing, momagri suggest that decisions taken in the future respect a special agricultural mix, which according to the principle of the energy mix, ensures the co-existence of different forms of agriculture (food, industrial ...).
The industrialization of agriculture, its more recent financialization and the necessity for massive investment in this sector are indeed a risk for marginalizing local agriculture and food production.
With regard to information and transparency in agricultural markets, the agreement provides for an information system on agricultural markets (Agricultural Market Information System, AMIS) and an initiative for the satellite tracking of world agriculture (Group on Earth Observation, GEO) to improve information on the two strategic variables that are production and stocks. AMIS will also face several challenges: the ability or willingness of each state to provide such data or not.
This point is all the more essential in that the statistical or simulation devices available to policy-makers are not necessarily adapted to the new context of globalization and financialization.
Other information also needs to be updated, such as the real nature of the support available for agriculture in each of these States. The SGPA indicator (Global Support to Agricultural Production) created by momagri aims to raise awareness to the fact that all States have various but significant devices to support their agriculture, a veritable geo-strategical asset in a world that will soon count 9 billion people.
Transparency in the markets also means that the models used by international institutions, including the FAO (the OECD Aglink model) should be able to simulate price volatility and thus provide reliable information to policy makers, particularly for those with a seat at the Rapid Reaction Forum. Momagri suggests that the simulations made by its business model be taken into account in the prospective analysis and scenario formulation for agricultural prices.
The theme of international coordination follows the observation made by the President of the French Republic, Nicolas Sarkozy, that global governance is fragmented. This text has the merit of stressing the need for cooperation between different actors and in particular international institutions.
Linking “global governance” and “food security”, the G20 on agriculture suggests the creation of a Reaction Forum within the AMIS system, hosted by the FAO.
But for this new structure to be able to carry out its mission effectively, it will still have to go beyond simple recommendation to allow States plagued by agricultural and food crises to take appropriate measures. At momagri, we reiterate our proposal for a Security Council modelled on the UN World Food Security Council to fill this office.
Reducing the impact of agricultural price volatility for the most vulnerable is a goal we can only welcome. The text retains the ideas of an “emergency reserve” and a “tool kit” to facilitate access to credit, physical and financial protection from price risks and insurance instruments and guarantees, or even counter-cyclical loans.
However there are still serious reservations on the accessibility to these protection devices by small farmers in vulnerable countries, as well as in industrialized countries.
Moreover, not only is agricultural price volatility a threat to all farmers in the world, but also to all consumers in the world. And as Pierre Pagesse, momagri President indicates “we need all the world’s agriculture to feed the planet.” The example of climate hazards in 2007 in Australia and in Russia in 2010 demonstrates that the weakening of agriculture in one of the major producing countries could destabilize the entire world market and, by extension, all the most vulnerable countries.
This means therefore that all farmers in the world must be protected from price volatility, not only the most vulnerable.
The last point of the Ministerial declaration, that of financial regulation [for operations on agricultural commodities markets] was finally passed on to the next G20 on finance. This is understandable, but risks trivializing the speculative phenomena particular to agricultural markets when specific decisions should be taken. In this context, agriculture should not be reduced to a special case, as it was in negotiations on international trade at the WTO.
G20 finance ministers should clarify the guidelines or terms of action, which to be effective, should go well beyond the introduction of “position limits” that would cap the volume of acquisitions by investors fixing deposits (see momagri proposals). Finally, this point should remind us that the regulation of financial transactions in agricultural commodities alone will not solve the problem of agricultural price volatility and must be accompanied by the regulation of physical markets.
To conclude, Momagri regret that the discussions did not enable a review the origins of price volatility. This is an expression of underlying trends that go much deeper than the simple equation “supply+stocks = demand” or the phenomenon of the financialization of agriculture. These variables do have a role in the fluctuations of agricultural prices, but acting on them alone will only provide a partial solution.
“Do not wait for the experts to agree, because they will never agree,” the sentence pronounced by Nicolas Sarkozy during the G120 Conference organized by the National Federation of Farmers’ Unions and Young Farmers in Paris on 16th 17th June, summarizes the difficulty of the exercise. The stakes are such that politics must reinvest the decision to tackle the flow of funds that are destabilizing the world's agriculture.