Exclusive: G20 to monitor world grain supply: draft

Farmers harvest rice on a paddy field in Ngoc Nu village, outside Hanoi June 10, 2011.

BRASILIA (Reuters) - The G20 group of economies is set to launch joint monitoring of world supplies of key grains to help prevent speculation from driving up food prices, a draft statement of a ministerial meeting next week shows.

Farm ministers gathering in Paris on June 22-23 will also urge the group's finance ministers to control farm commodity speculation by adopting stricter regulations for food derivatives markets, said the statement, obtained by Reuters.

Global food prices rallied earlier this year on rising grain costs, renewing concern about food security and inflationary pressure, particularly in developing countries.

Despite easing since then, food prices in May were up 37 percent from a year earlier.

The statement is a preliminary draft. An agreement on what measures to adopt will emerge only after the final text has been debated at next week's meeting.

The draft calls on G20 finance ministers to impose position limits on futures markets, restricting the amount speculators can bet on rises or falls in food prices. France and others have blamed excessive speculation for recent price spikes.

Paris has made stronger regulation of commodities markets, mainly agricultural, a priority of its year-long presidency of the Group of 20 leading economies. Winning over other nations to its proposals could boost French President Nicolas Sarkozy's expected bid for re-election next year.

In a speech to French farm unions on Thursday, he urged agriculture ministers to back its proposals.

Bruno Le Maire, France's agriculture minister, toured several G20 member countries this year to lobby peers, and his success will rely on support from the United States, home to the biggest grains exchanges.

Under the proposed statement, the G20 would share market information through a joint database -- the Agricultural Market Information System (AMIS) -- that would be housed at the United Nations Food and Agriculture Organization.

Non-G20 members and private-sector players would be encouraged to participate in the database by providing details on stocks and production of wheat, corn, soy and rice, and the system would later be expanded to include other foods.

"We emphasize that AMIS will enable financial actors and market regulators to be better informed of the fundamentals of physical markets. Transparency on physical markets is important for derivatives markets but the reverse is also true," the statement said.

"NOT ENOUGH"

The text may disappoint those hoping for a tougher approach on commodities speculation after France's rhetoric.

Oxfam International's G20 policy lead, Romain Benicchio, criticized the text as too timid. It appeared to dismiss expert opinion that using food crops to produce biofuels contributed to increased volatility in food prices, Benicchio said.

"They still have time to seize the opportunity at this vital meeting. But the solutions they're contemplating now don't go far enough," he said, calling for an end to subsidies for biofuels.

Other countries, such as Britain, disagree that futures speculation caused recent price rises.

The United States has approved a law to introduce pre-set position limits in a range of commodities but has yet to apply them, while the European Union is expected to include position limits in a forthcoming securities trading law.

Data from AMIS would also be used to help a proposed Rapid Response Forum formulate policies to deal with food supply crises.

"We agree that risk management of food price volatility in developed and developing countries would provide an important contribution to promote longer term agricultural development," the statement said.

The G20 farm ministers will also back a UN World Food Program pilot project for emergency humanitarian food reserves, as well as World Bank efforts to boost food security in vulnerable nations during price surges and external shocks.

At their meeting next week, they will discuss scrapping taxes on food donations and seek to coordinate research on wheat cultivation as a means to improve supply security for the cereal.

Other proposals would seek increased coordination and sharing of crop forecast data obtained by satellite and more analysis on the effects of using food crops to make biofuels.

(Additional reporting by Charlie Dunmore in Brussels; Editing by Raymond Colitt and Dale Hudson)