April 7, 2011

S. A. Ministers Disagree with Sarkozy on Food Price Controls

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Agricultural ministers from six South American countries met last week in an attempt to counter the push by France's president Nicolas Sarkozy to place controls on surging commodity prices as a way to control food inflation. The six ministers are members of what's called the Southern Agriculture and Livestock Consul (CAS) which is composed of agricultural ministers from Brazil, Argentina, Paraguay, Chile, Uruguay, and Bolivia.

The ministers feel that the best way to hold down the increase in food prices is to increase agricultural production and not to set artificial price limits on commodity prices. They indicated that there are only a few areas of the world where agricultural production could be significantly increased - South America, Africa, and Eastern Europe. Of those three areas, only South America could significantly increase agricultural production in a relatively short period of time and the emphasis should be on increased production and not controlling prices.

They feel the approach advocated by the French president would actually hinder agricultural expansion. Their official communique indicated that the approach taken by the developed countries to increase food security would actually make the situation worse by acting as a disincentive toward the countries that have the capacity and acreage necessary for increasing production. They pointed out that food insecurity is not just the result of price increases, but also due to structural poverty that limits people's ability to purchase food.

The under secretary of agriculture from Brazil, Edilson Guimaraes, indicated that during the last 40 years there were three times during which agricultural prices spiked, the 1970s, the 1990s, and the 2000s, and that all three price spikes were related to worldwide economic problems. In the 1970s, the price spikes were related to the rise in petroleum prices. In the 1990s, they were related to the Asian currency crisis and in the 2000s; they have been related to the world economic crisis.

The CAS communique was signed by Wagner Rossi (Brazil), who is the current president of the group, Julian Dominguez (Argentina), Enzo Cardoso (Paraguay), Jose Antonio Galilea (Chile), Daniel Garin (Uruguay), and Nenesia Achacollo (Bolivia).