France pushes for strategic food stocks to cool prices

RENNES, France Tue Sep 11, 2012 9:15pm BST

1 of 3. France's President Francois Hollande (R) and former FNSEA farm union president Jean-Michel Lemetayer (C) attend the International trade fair for livestock (SPACE) in Rennes, western France September 11, 2012.

Credit: Reuters/Stephane Mahe

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RENNES, France (Reuters) - French President Francois Hollande said on Tuesday he was trying to persuade other world leaders to create strategic stockpiles of agricultural commodities to prevent extreme food price swings on international markets.

A drought in the U.S. Midwest and the Black Sea regions sent grain prices to record highs this summer and raised concerns of a repeat of 2008, when a spike in food prices triggered riots in some countries.

"I am pushing with heads of state and government for protection against (market) volatility in the form of emergency food stocks," Hollande said in a speech to farmers in Rennes.

"I propose to implement market management and crisis management policies by setting up strategic stocks," he said, stressing that he was "convinced of the benefits of global governance for subjects as crucial as food security."

His is one of the first calls by a world leader to set up a strategy to be able, when shortages emerge, to pour supplies into a market where prices are mostly moved by fundamental elements such as supply and demand.

However, it is unclear how major producers such as the United States, Russia or China would welcome such an initiative at a time of economic gloom as the price of food storage, most of which is in the hands of commercial companies, is costly and sensitive.

Hollande did not specify what food the reserves could include or where they could be located.

FIGHT VOLATILITY

France had raised the issue of reserves last year as it chaired the Group of 20 leading economies. But the final deal limited promises to food aid stocks in countries that could most need them, a measure that still needs to be implemented.

Strategic agriculture stocks could prove difficult to manage because, unlike strategic oil inventories that can be kept in storage for months or years, grain reserves would have to be rotated regularly, complicating the process and elevating costs.

The United Nations' food agencies urged world leaders last week to take swift, coordinated action to ensure that food price shocks do not turn into a catastrophe that could hurt tens of millions of people in coming months.

France said that if the crisis worsened it might convene an emergency meeting of top G20 officials to approve joint action. But it stressed that it would wait for a U.S. government report on grains supply and demand due on Wednesday before taking any decision.

Oxfam estimated that a global grain reserve of just 105 million tonnes would have been enough to help avoid the food price crisis in 2007-2008. The cost of maintaining this reserve would have been $1.5 billion; or just $10 for each of the 150 million additional hungry people that may have been fed.

Breeders, whose animals heavily rely on grains for their feed, have been among the hardest hit by the rally in grain prices. French Agriculture Minister Stephane Le Foll was expected to put forward an action plan to help them on Wednesday.

"I realise that whatever our efforts, all of this can be reduced to nothing if this volatility of farm products and commodities persists," Hollande said.

(Writing by Sybille de La Hamaide; Additional reporting by Jonathan Leff; editing by Catherine Bremer, Jim Marshall and Dan Grebler)

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