G20 action needed to avoid food price panic

BRASILIA: To avoid exacerbating shortages and price spikes, G20 nations must avoid grains export limits and panic buying after a US drought devastated crops and Russian wheat supplies have fallen, a farming official from No. 2 soy grower Brazil said.
Meat prices are rising after the US corn crop was slashed by about a third by the worst drought in 50 years and drought-hit wheat crops in Russia and Ukraine appear set to drive up the price of staples like bread.
France, the US and G20 president Mexico are mulling holding a G20 conference call to agree on joint action to tame rising food prices as soybean and corn prices hover near record levels and stir inflationary pressures. They will evaluate forthcoming USDA crop data before making a decision.
Marcelo Guimaraes, deputy director of Brazil’s Agriculture Ministry’s Economic Department, said participants in the G20 call, if held, should seek to avoid mistakes of the 2008 spike that he said only served to accelerate price rises.
“Some countries restricted exports and some made very big purchases and this ended up throwing fuel on the fire. It was uncoordinated action that meant there were even higher prices,” Guimaraes said.
“We should sit down and agree this is not the solution because this creates panic that just makes the situation worse,” he said.
International coordination of food supply imbalances by the G20 group of wealthy and emerging nations was agreed upon at its 2011 summit that created a Rapid Response Forum to take swift, joint action in the face of food crises.
A meeting in the coming weeks would be the first time the forum discusses action on high prices, as grains prices surge again for the third time in four years.
Policymakers are less alarmed by the current jump in food prices than the spike of 2008 since this time supplies of rice are plentiful, meaning food security is not a major issue. But wheat is a concern, with disappointing output from key producers Russia and Ukraine.
Ukraine’s agriculture ministry and grain traders’ unions agreed this week to cap exports of grains, traders there said, though no official confirmation was immediately available. Russian officials say they plan no export limits but traders are doubtful.
Policymakers are hoping South American producers Brazil and Argentina can help offset the US grain shortage as farmers in South America’s grain belt gear up for planting later this month.
Guimaraes said Brazil’s exports of corn would rise this season to 12 million to 14 million tons, up from last year’s 9.5 million tons thanks to a record crop. He dismissed talk that Brazil, the No. 3 corn exporter, would restrict exports of the grain.
“Corn producers are smiling from ear to ear. On the other hand, the poultry industry is being hit,” he said. Brazil is the world’s largest chicken exporter but producers’ profits have been slashed by the cost of feed grains.
France, which spearheaded initiatives to tighten international coordination of agriculture markets during its stint heading the G20 last year, is drafting plans to mitigate the impact of costlier grains for its livestock producers. Those could include including a solidarity fund in which grains producers would share some of this season’s bounty.