France's Sarkozy Calls for G-20 to Regulate Commodities and Price Swings
French President Nicolas Sarkozy
Michele Tantussi/Bloomberg
French President Nicolas Sarkozy.
French President Nicolas Sarkozy. Photographer: Michele Tantussi/Bloomberg
French President Nicolas Sarkozy said regulation of commodity markets will be a priority as he leads the Group of 20 nations this year, and inaction may cause food rioting in the world’s poorest countries.
Some commodity markets lack safeguards to limit price spikes and “price manipulation,” Sarkozy said at a press briefing in Paris today. France’s head of state said he asked Russian President Dmitry Medvedev to help study the role of derivatives in commodity-price swings.
“If we do nothing, we risk having food riots in the poorest countries and also an unfavorable impact on global growth,” Sarkozy said. “We want regulation of the financial markets for commodities.”
Global food security may face a threat from “excessive price volatility and speculation,” farm ministers from 48 countries said in a joint statement in Berlin on Jan. 22. World food prices rose to a record in December, according to the United Nations, and a jump in food costs helped spark deadly riots in Algeria and Tunisia this month.
Information on physical-commodity stockpiles must be improved, said Sarkozy, who proposed creating a shared database similar to one that exists for oil. When Russia last year banned grain exports after a crop-damaging drought, “there wasn’t a single calculation on the exact state of stocks,” he said.
Deposit Rule?
Commodity-producing countries must be made to understand “that they themselves have the largest interest in an orderly movement,” Sarkozy said. “A frenetic upward jump is followed by a frenetic movement downward.”
One of the rules France proposes is for commodity investors to set aside a deposit equal to part of the value of the raw material being traded, according to the president.
“Does it make sense that you can buy considerable stocks of commodities without running any risk, without blocking any sum, without committing to any cargo delivery?” Sarkozy said.
France favors the existence of markets for agricultural- commodity derivatives because they allow for risk coverage, according to Sarkozy. Commodity markets expanded globally before worldwide regulations were put into place, he said.
“We have to catch up,” Sarkozy said. “It’s not about killing these derivative markets, it’s about regulating them.”
To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net.
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
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