Output not stockpiles key to cap food cost-EU aid chief

MILAN Mon Oct 1, 2012 9:49am EDT

EU Commissioner for Development Andris Piebalgs speaks to Reuters during an interview at Chatrium hotel in Yangon February 13, 2012. REUTERS/Soe Zeya Tun

EU Commissioner for Development Andris Piebalgs speaks to Reuters during an interview at Chatrium hotel in Yangon February 13, 2012.

Credit: Reuters/Soe Zeya Tun

MILAN (Reuters) - Building strategic agricultural stocks to curb market volatility, as proposed by France, would not be the most effective way to tame food prices, EU Development Commissioner Andris Piebalgs said on Monday.

He said what was needed instead was an increase in food production in the world's poorest countries, which remain vulnerable to the threat of a new food crisis despite the recent easing in grain prices from record highs hit this summer.

Last month, French President Francois Hollande launched a global campaign to win support for creating strategic stockpiles of food commodities after a year of drought renewed fears of a new crisis in agricultural supplies.

Paris has also called an emergency meeting of G20 farm ministers for mid-October to discuss ways to curb price volatility.

"I believe it is one of the instruments but it is not the most effective," Piebalgs told Reuters in an interview on the sidelines of an international cooperation conference in Milan when asked about the French stockpiles proposal.

"The answer to food insecurity is sufficient food production in the world's poorest regions," he said, adding that increasing investments in agriculture was the best way to keep a lid on prices.

"Resilience in farming, access to water, fighting against climate change, crops, access to the markets - it's a lot of elements, one element does not help sufficiently," he said.

The worst drought in more than 50 years in the United States has sent corn and soybean prices to record highs over the summer and, coupled with drought in Russia and other Black Sea exporting countries, raised fears of a global food crisis like the one that led to rioting in poor countries in 2008.

Food prices have fallen back in the past few weeks but Piebalgs said there was no room for complacency.

"Globally, food prices are now not a matter of concern in the short term but there are problems in the Sahel, continuing problems in the Horn of Africa and other regions," he said, also mentioning Haiti. "The situation remains very vulnerable."

France first 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 might most need them, a measure that is yet to be implemented.

It is unclear whether Hollande will be more successful this time round in convincing the United States or his European peers to rebuild public grain stockpiles that were liquidated decades ago. Or, as in the case of China, to use existing government stockpiles more collaboratively to address global issues.

The French proposal, which was backed by the U.N.'s Food and Agriculture Organisation, did not specify how and where the food stockpiles would be developed.

Analysts have been skeptical about the idea of reserves on a global scale because they are costly to run, particularly as grain has a shorter storage life than commodities like oil.

Piebalgs said he hoped European moves to cap the use of food-based biofuels would be followed elsewhere, and said there was a growing consensus, even in the United States, which is a major biofuels producer, that food crops should first and foremost feed people.

"We believe that biofuels should be produced from food residues after crops have been used for providing foodstuff, then the remains can be transformed for second- and third-generation biofuels," he said.

The EU Commission announced a major shift in biofuel policy last month, saying it plans to limit crop-based biofuels to 5 percent of transport fuel.

(additional reporting by Sara Rossi and Paris bureau; Editing by Anthony Barker)

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