CISON DI VALMARINO, Italy, April 18 (Reuters) - United
States Agriculture Secretary Tom Vilsack cautioned on Saturday
against the idea of creating global grain reserves, saying it
might not be the ideal tool to ensure food price stability.
Speaking on the margins of a meeting of G8 and G5 farm
ministers, Vilsack said the U.S. experience with such schemes
had shown it was better to focus on technical advances in
irrigation, seed varieties, machinery and farming methods.
The suggestion of creating a global grain reserve was
suggested some months ago for the three-day meeting, to help
mitigate price shocks and reduce speculative commodity trade,
where Vilsack warned about dangers of over-regulating markets.
On the idea of global grain reserves, now unlikely to appear
in the G8 farm summit conclusions, Vilsack said: "Our recent
experience with that concept was that in theory, it sounds like
a terrific idea but in practice it was very difficult."
"What we saw was that it really didn't create the kind of
stability in pricing that people thought it would. What it
actually created was a kind of 'feast or famine' mentality."
World cereals prices soared to record highs in 2007 in the
first half of last year, fuelling spikes in food prices which
triggered riots in some developed countries along with a series
of commodity export bans. Since then, prices have since fallen
back, mainly thanks to larger crops grown in 2008.
"We have some reservations about how effective that specific
idea (grain reserve) will be ... (but) I know there are some
countries are very committed to it," Vilsack said.
There were also dangers in legislation to curb commodity
trading activity, he said, warning against over-regulation of
futures markets to limit the effects of speculation -- blamed by
many for excessive price volatility and its economic knock-on
effect on Third World agricultural producers.
"There's an upside and a downside. If speculation gets out
of hand, you can have wild swings," Vilsack said. "Whenever you
deal with futures markets, you're dealing with some kind of
speculation so I think you have to be careful that you don't
throw the baby out with the bathwater."
"There may be additional transparency issues, reporting
requirements, so that people know what's going on ... but you
have to careful that you don't over-regulate the process and
create a situation where it seizes up and doesn't function."
(Reporting by Jeremy Smith)
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