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G20 Farm Talks Set To Focus On Food, Shun Markets

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When G20 farm ministers meet this week France is unlikely to get what it wants - assent to tougher commodity trading rules - although the bloc might agree to share key data on grain supplies to ease the threat of food shortages.

Paris has made tighter regulation of commodity markets a priority of its 2011 presidency of the Group of 20 leading economies as President Nicolas Sarkozy has blamed speculators for food price inflation that has fuelled unrest in North Africa and the Middle East.

Surging demand for food and fuel will keep upwards pressure on farm prices for years to come, but more transparency on how much grain, rice and other foodstuffs countries are producing could calm supply concerns that drive up prices.

While all G20 nations agree that steps must be taken to tackle food inflation, they are split over whether prices should be tamed by regulation or by increased agricultural production.

"There will be a few concrete measures on relatively secondary issues but what's important is the attention the international community is giving to this issue of agriculture," said commodity specialist Philippe Chalmin. "This is the first time there is such an international meeting on farm issues."

Chalmin, who is also an advisor to the French government, said he expected the final communique to dwell on speculation but saw no ground for a deal on regulation given the gap between "Sarkozy's vision and the vision of more reasonable people."

Indeed, France's proposals to impose position limits on how much of the market an investor can buy into, or a minimum cash deposit for commodity derivative transactions, have failed to win support from countries such as Britain, which believe speculation is not the root of food inflation.

The United States, Brazil and Argentina say that instead of focusing on regulation the G20 should review measures to bolster farm output through investments and the use of new technologies.

"We need more production, with more farmers and more added-value goods, because that's the only way to provide food for the world," Argentine Agriculture Minister Julian Dominguez said last month.

A communique draft obtained by Reuters on Thursday showed farm ministers meeting in Paris on June 22-23 could end up with a watered-down deal limiting decisions to agricultural issues, mainly data or food supplies, not markets.

They are expected to pass on the tricky issue of regulation to G20 finance ministers with a statement that "strongly encourages" them to "take the appropriate decisions for better regulation and supervision" in time for the closing summit of France's G20 presidency in Cannes in November.

Sarkozy, seeking to impress on the world stage ahead of a tough reelection battle in 2012, set an ambitious agenda for France's G20 presidency with goals ranging from defining ways to reduce economic imbalances to weaning the world off the dollar as its sole reserve currency.

French Agriculture Minister Bruno Le Maire said, however, a deal was "not guaranteed at all" and that France would not sign something that does not tackle financial issues.

A Global Deal Or Nothing?
The draft communique mainly covers purely agricultural issues such as the launch of a database on national farm supplies, a joint research programme on wheat and a rapid response forum between G20 states in case of a food crisis.

G20 ministers would also agree to set up food aid reserves and remove export restrictions for humanitarian supplies.

But there may be resistance even on these points as China is reluctant to share information it sees as strategic. China also considers, as does India, that giving exhaustive and timely data on stocks would be difficult for practical reasons.

Russia, which imposed a unilateral ban on grain exports in the summer of 2010 after a severe drought ravaged its harvests, has been among the countries wary of putting limits on export restrictions, even for humanitarian purposes.

Meanwhile, Washington is dragging its feet on a proposal to set up strategic emergency food stocks in emerging markets, as it risks undermining its exports to the countries concerned, and it opposes any curb on biofuel production.

"This topic is not ripe," for an agreement, Le Maire said on Friday, a position likely to anger organisations such as charity Oxfam which have blamed the growing use of arable land for biofuel production for food security issues.

"Reforming flawed biofuels policies which divert food into fuel, and helping poor countries build up food stocks to guard against extreme fluctuations in global food prices must be at the top of their agenda," Oxfam said on Friday.


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