November 17, 2009 / 7:06 PM / 10 years ago

UPDATE 1-New food price crisis a matter of time-UN

* U.N. envoy criticises agri firms’ market dominance

* Speculation, biofuels behind food price spikes

(Adds quotes from interview)

By Silvia Aloisi

ROME, Nov 17 (Reuters) - A new food price crisis is only a matter of time, the U.N. food envoy said on Tuesday, criticising world leaders for not tackling what he saw as the key factors behind price spikes in 2008 — speculation and biofuels.

The U.N. Special Rapporteur Olivier De Schutter also said a U.N. food summit in Rome failed to address the domination of global food markets by large agri-business corporations.

“Maybe it will be April 2010, maybe April 2011, but we will have a new food price crisis because the direct causes of the 2008 spike are still there,” De Schutter said in an interview.

“There are indications already, because oil prices are going up and they are very closely linked to agricultural commodities prices. As soon as a big producer will be in difficulty ...speculation will set in,” he told Reuters.

He said commodity investment funds had invested massively in agricultural futures markets in late 2007, and were followed by a wave of speculative traders betting on continued food price rises. That contributed to pushing food prices to record highs last year, until the speculative bubble burst in the summer.

An increase in the production and use of biofuels based on agricultural commodities was also instrumental in driving food and land prices up, he said.

De Schutter said a Rome summit declaration was weak on both issues. He mentioned commodity reserves and quotas for biofuels as possible measures to keep a lid on prices.

BIG FIRMS DOMINATE MARKET

De Schutter also took issue with big food and agriculture corporations, saying they operated “without any sort of control and with often extremely high levels of concentration that represent a serious market failure”.

“Small producers, if they want to enter the global supply chain, face a very small number of actors who have a dominant position in the market and can basically dictate the prices,” he said.

“The small producers have no choice but to go through the large commodity buyers, the large food processors, the large retailers to get access to this high value market. They are in a very weak bargaining position, and their ability to get a fair price for their produce is very little.”

At a U.N. forum to drum up private sector support in the fight against hunger last week, food and agriculture majors said they were already investing millions of dollars in sustainable farm development to secure reliable supplies, cut costs and boost positions on new markets.

Participants at the forum, which included Nestle NESN.VX, Unilever (ULVR.L), Cargill [CARG.UL], Bunge (BG.N) and Syngenta SYNN.VX, said the investments were not charity, but part of their business strategy.

But De Schutter said that big groups were often “tempted” to cut agricultural labourers’ wages and this undermined efforts to support small-scale and sustainable farming.

“We cannot do without them but they are not accountable to anybody, for example in their buying and pricing policies, or in the way they include or exclude certain farmers,” he said.

“The declaration is entirely silent about how to address this,” he said. “And it is silent about the right of agricultural workers to a living wage.” For stories on the U.N. world food summit, click on [ID:nLD29049]

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