World farmers’ forum – Food challenge conference
Paris, June 16 , 2011
Secretary-General, Angel Gurría,
Minister, Bruno Le Maire,
Representatives of farmers’ organizations,
You are representing the farmers of the world here. In the past 20 years you have experienced more upheavals than farmers have seen in several centuries.
Faced with globalization, natural disasters and the unpredictable law of the markets, as the world’s farmers, you are in the front line. You need stability, and the world needs stability with you.
EURO AREA STABILITY
I hope you won’t hold it against me if, before I move on to farming, I briefly mention the issue that will be on the top of the agenda at the European meetings between now and the end of June. I am referring to the stability of the Euro Area.
For French people, the euro is the first source of stability. Remember the competitive devaluations that could wipe out years of effort in a few minutes?
Alongside the Common Agricultural Policy, the euro is one of the great European achievements. It is our duty to defend and safeguard the euro. Without the euro, there is no Europe, and without Europe, there can be no peace and prosperity.
When we had to take action during the financial crisis, I did not hesitate. Now that the recovery is under way, we have no right to jeopardize the euro.
I am saying that because in the past year some countries in the Euro Area have been shaken by an unprecedented crisis. They are implementing recovery programmes on a scale unseen in history. In the past year, we have taken historic decisions to strengthen European integration.
In recent weeks, there has been public debate about the form – but not the principle – of support for Greece. That debate is legitimate and I can understand why each of our member states and each of our institutions wishes to express its point of view.
But I urge everyone to act responsibly. What we need most now is unity. Therefore we must move beyond national squabbles and regain a sense of our common destiny in Europe.
I call on everyone to show a sense of responsibility and necessary compromise, which underpins the construction of Europe. We must defend our common currency. We must defend European institutions. We all have a duty to do everything in our power to preserve the stability of the Euro Area, because without stability there can be no growth. We are all concerned and we need to take decisions now.
GLOBAL HUNGER/DEMOGRAPHIC CHALLENGE
What I have just said is, I think, particularly true for you, the world’s farmers. Like all economic actors, you are adversely affected by volatile commodity prices. You are at the heart of the global economy, but you are much more than that, because farming is not like any other job and agricultural products are not like any other goods.
Our survival on this planet depends on your business. That is why it was important to me to come and meet you this morning, and I would like to thank the National Federation of Farmers’ Unions (FNSEA) and the Jeunes Agriculteurs union for taking the initiative of convening this forum at such an opportune time.
The end of farmers is a myth, one that we’ve been hearing for decades. Recent events show us the urgency of putting agriculture at the forefront of national policy concerns.
Some countries are already confronted with the tragedy of famine and the cruel lack of agricultural resources. One billion of the world’s people suffer from hunger and there is talk of the disappearance of farmers.
One-third of children born in developing countries are malnourished and three million children die every year from malnutrition.
Behind the figures are facts, and the facts are unbearable. The tragedy of hunger does not concern only South Asia and Sub-Saharan Africa. It engages our ability to think solidarity on a global level. How can we feed the world and enable the population to benefit from development, while conserving the planet and natural resources? Agriculture today must meet three challenges: a demographic challenge, an environmental challenge and a development challenge.
The demographic challenge:
There will be nine billion of us in 2050. We need to increase our agricultural output by 70% by then. That is vital. Global agricultural output increased by 3% per year between 1960 and 1990 but has since fallen to half that rate, or 1.5%. Every year 30 million hectares of farmland around the world are lost to urbanization and industrialization. The production challenge is therefore considerable.
We must create the conditions for faster growth in global agricultural output. That will not be easy because we are simultaneously confronted with the challenges of climate change and conservation of natural resources.
There again, you farmers are on the front line. You all know about the terrible drought we are experiencing in France. But what is still only a temporary phenomenon in our country is already a permanent disaster in some regions of the world. The Intergovernmental Panel on Climate Change estimates that African harvests could fall by 50% by 2020 because of drought. So that’s three billion people in the world to feed, 30 million hectares less of farmland per year, and falling productivity because of climate change.
I know how mobilized farmers are on these issues. We must step up our efforts to develop alternative energy sources and cropping practices.
We must regenerate and reinvest in the agriculture of the 21st century. At stake is also the future of the global economy, its ability to deliver sustainable growth, which is the source of development for the population.
That development challenge primarily concerns farmers themselves. You account for 1.3 billion jobs worldwide, since agriculture is the largest economic sector. Some 40% of the world’s working population depends directly on local agricultural markets. But in developing countries, small farmers struggle to earn a livelihood from farming. And under pressure from urbanization, the price of farmland is constantly rising. In this environment, how can we get farmers to feed other people when they can barely survive themselves?
We must do everything to help them. That is a necessity for the development of whole regions, whose entire economies depend on farming. Where do almost 80% of the poorest people in the world live? In rural areas, and farming is their only way out of poverty.
Feeding the world into the long term and assisting the economic development of the poorest populations without endangering the future of the planet are the goals that our century has entrusted to farmers. They are what make agriculture a strategic sector.
AGRICULTURAL PRICE VOLATILITY
Those requirements are compounded by working conditions that are made more difficult or impossible by price volatility. Numerous parameters – such as population growth, the scarcity of arable land and the decline in agricultural output – are aggravating the shortfall between supply and demand for food products. Those pressures are undoubtedly the leading cause of price inflation and agricultural price volatility.
Take wheat, for example: the price of wheat rose from €140 a tonne in July 2010 to €280 a tonne in February 2011, before falling to €230 now. The FAO food price index is still higher than the peak of 2008 in the midst of the food crisis.
That price volatility has become untenable, firstly for you agricultural producers in both the North and the South, because it creates absolute uncertainty about your income. It prevents you from investing. It erodes your purchasing power. When prices collapse, your potential to produce is threatened. This situation does not exist in any other sector. Name me one other occupation where you can lose 30% of your income in any year. There isn’t one.
Price volatility is equally untenable for consumers, especially when prices flare suddenly: hunger riots are a dramatic illustration of the consequences of fluctuations in agricultural commodity prices.
Faced with these developments, we need to change pace, change scale and change model, and stop thinking that the situation will settle down and go away without our taking any initiative. The G20 countries account for 70% of farmland, 82% of global grain output and 80% of world food trade. So it’s only natural that the G20 has the first duty to lead that change and design its foundations. That’s why France sought to put agriculture on the G20 agenda.
Mobilization is the first step, and it was a difficult one. When France put agriculture on the agenda, no one could believe it. No one. Now it seems the world has at last realized the crucial role that agriculture plays in the future of the planet. But it is not about waving symbols. Raising awareness is good, but it is not enough. We must act – the word “action” is not a swear word – and not be satisfied with saying that it’s too complicated. If we only had to deal with what’s simple, we’d have a very slim agenda indeed! We must act and learn to break with the mistakes of the past. We cannot act in the 21st century as we acted in the previous century. The world has changed and we must change our methods.
NEW AGRICULTURAL MODEL
The new agricultural model that we are calling for will have to be based on two fundamental principles.
The first principle: reinvest. Our meeting, and the work you will accomplish over these two days, should give a signal to public and private reinvestment in the world’s agriculture. Produce more to feed people, produce better to ensure sustainable production. This will only be possible if agriculture becomes a sector for major investment.
Over the past 20 years worldwide, the share of official development assistance allocated to agriculture has fallen from 15% to less than 5%. Governments must honour their pledges, in particular the G8 countries, which in L’Aquila in July 2009 agreed to increase their support for developing agriculture by $22 billion over three years.
Obviously, official development assistance will not be enough. We must foster private investment in agriculture as long as it is responsible investment. Private investment should encourage the development of food production and contribute to the organization of product industries.
Lastly, that financial effort must include research and innovation. Agronomy must again play a driving role to ensure sufficient growth in food production. All areas should receive attention, such as seed research, fertilization and crop protection. The research effort should cover crucial issues, such as new cropping practices, water management – which we are discussing in France – and the structure of product industries and local markets.
The second principle of the new agricultural model that we need to build is modernized global governance.
At the Rome summit in July 2008, I proposed a global partnership for food, food security and agriculture, based on international coordination, research and consistent funding. Since then, the reform of FAO has begun and the Committee on World Food Security (CFS) been created.
I am delighted with these reforms. But we need to go much further now.
It is important to improve the operation of global agricultural markets. World agricultural markets are the least transparent of all. There is no transparency in world agricultural markets, which are prone to extreme volatility. We have no information about world output, harvest forecasts, consumer demand or even global stocks. It is time for the requirement of transparency to apply to agricultural markets.
With our G20 partners and the international organizations concerned, we would like to launch a new market information system, on the model of what was done almost 10 years ago for oil. The system will be hosted by the United Nations Food and Agriculture Organization (FAO), which is in line with its ambit. The system will collect all the available data, including about public and private stocks, and everyone will be able to access it.
I would like us to launch the new system at the meeting of G20 agriculture ministers, which will be held next week in Paris; Bruno Le Maire and I would like Europe to catch up its lag in information exchange. The new system should enable us to strengthen international cooperation on food security and improve international coordination in order to predict – and especially manage – crises much more effectively.
When an event occurs now, each country reacts according to its immediate interest, without consultation, even though its decisions can have dramatic consequences for the whole planet. We saw the impact of this during the hunger riots in 2008, when some countries closed their borders and banned all food exports, even though, paradoxically, there were enough available resources to supply the market. That makes no sense.
Given the risk of crisis, the major market actors should meet to develop a common response. A consultation forum would avoid unilateral and damaging decisions. I would like you to think about this type of initiative, which would make our world more united.
FINANCIAL MARKET REGULATION
Lastly, we must regulate financial markets in agricultural commodity derivatives. I know the causes of agricultural volatility are debated, and various parameters, such as speculation and weather conditions, have an influence. All this can be debated. But I would like to make a proposal: let’s not wait for the experts to agree before we act! Because one thing is for certain: the experts won’t agree. If you wait, nothing will be done, and we cannot afford to do nothing. The G20 has made commitments to improve the operation of derivative markets, particularly oil derivative markets. I would like to see those commitments extended to agricultural derivative markets. Is there any reason, any argument for us not to apply what we did for oil derivative markets to agricultural commodity derivative markets?
That’s a crucial issue because the volumes traded on agricultural markets have increased exponentially these past years, at the same time as the gap between the physical markets and the financial derivative markets has widened.
I will take a single example: the Chicago exchange. Every year, trading in agricultural commodity derivatives represents 46 times the annual US output of wheat and 24 times the US output of maize, and I’m told there’s no speculation. I would like someone to explain to me how you can trade 46 times the annual output of US wheat and 24 times the annual output of US maize. We should remember that derivatives were originally created to protect sales of agricultural products against fluctuations on the physical market! But now derivatives are aggravating fluctuations on the physical market. Of course, it doesn’t take a specialist to see this. In the commodity futures markets in Chicago today, 85% of short positions are held by purely financial actors, whose business bears no relation to the goods traded. That example proves how our world has lost sight of value and reality and of a sense of capitalism that should serve development and the prosperity of the population. That kind of capitalism does not reflect our values.
To those who fear that France wants too many rules, I will say again that a market without rules is not a market, and that the capitalism we want is a productive capitalism, not a solely financial capitalism.
Making the economy meaningful again, making capitalism stand on its own two feet, does not mean intervention on prices, which I have never called for, nor dismantling the financial economy, which we need. It means ensuring that price formation works well, and preventing certain abuses. Is it normal to be able to buy a large quantity, say 17% of a physical market in a food commodity, without paying a cent for it, not a cent? Because you can take a position in the cocoa market, which is so important to our African friends, you can buy 17% or 20% of it, not pay a cent, cause panic and therefore a speculation effect and then sell the quantity you purchased a few weeks later and pocket the profit without having spent a cent. That’s not the capitalism we want. It’s not respectful of the work of the producers and farmers and it’s not in the interests of consumers. It’s not our idea of value creation in the market economy, which is based on work, added value, research and on innovation, and which does not involve playing roulette on an exchange where you can’t lose. It is possible to change things if you and we demand it together. In any case, the French presidency is determined to spearhead those changes.
Like the physical markets and the financial markets, agricultural commodity derivative markets must be subject to the rules of transparency, regulation and supervision. France’s aim is for the G20 countries to adopt forceful decisions and principles in this area.
Ladies and gentlemen,
Looking forward to the G20 meeting in Cannes, France is preparing an action plan to reduce the volatility of agricultural prices, and to lay the groundwork for productive, sustainable agriculture that will be able to feed the entire world population in 2050. This is in all our interests and there is room for all types of agriculture. There is room for American agriculture, there is room for European agriculture, which we must defend, there is room for African agriculture, which needs to be developed and supported, and there is room for Asian agriculture. The needs are huge and we do not know how to meet them. Therefore let us pool our efforts, and not think that gains by farmers in one region mean losses for farmers in other regions, because we are all participating in a collective effort.
The plan will be discussed by the G20 ministers of agriculture, who will meet in Paris next week – on 22 and 23 June – on the invitation of France’s Agriculture Minister. But the plan will only be complete, solid and reliable if the world’s farmers contribute to it. Therefore I’m relying on your work to contribute to the proposals that we will present to the G20 summit at the end of this year. We need your solidarity because you are in a global market and we should all stick together and imagine the agricultural model of the 21st century. I hope you understand how important it was for me to be here with you today.