MILAN, Nov 13 (Reuters) - Volatility in food and agricultural commodities prices has become a permanent feature of global markets due to speculative trading, the chairman of the world's biggest food group, Nestle NESN.VX, said.
Food prices spiked in 2008 due to a rally in agricultural commodities, triggering riots in poor countries and panic buying in rich nations. Prices have fallen back since than but have remained volatile and are hovering well above 2006 levels.
A long-term balance between supply and demand on grain markets, which had kept prices relatively stable over the past few decades, has been broken by increased consumer demand, especially in Asia, and by growing bioenergy demand, Nestle’s Peter Brabeck-Letmathe said on Friday.
Then speculative traders piled in and fuelled volatility, Brabeck told reporters at a private sector conference on food security ahead of a food summit in Rome next week.
“The market has become much more volatile, because you have so much speculation in it ... I think this has become a permanent shift,” Brabeck said.
He said it was up to politicians to work out a mechanism to stabilise agricultural commodities prices.
“It would be very difficult to find a stabilising system that can counterweigh this enormous amount of money that is coming into the market,” he said referring to speculative flows.
A final draft declaration, expected to be signed at the summit next week and seen by Reuters, says world leaders will “consider non market-distorting international measures to mitigate the impact of food market volatility on the poor.” It did not elaborate. [ID:nLC411324]
The draft says the leaders will ask international organisations to examine “whether a system of stockholding can be effective” in dealing with price volatility and humanitarian emergencies -- an idea touted by G8 agriculture ministers earlier this year.
French Farm Minister Bruno Le Maire said on Thursday the draft declaration was insufficient and that Paris wanted firmer proposals on regulating global agricultural markets.
He cited development of future markets for those commodities that do not already have one, as well as the creation of regional grain stocks, as possible measures. (Reporting by Svetlana Kovalyova, editing by Anthony Barker)
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