French President Nicolas Sarkozy said Tuesday he wants the world's group of 20 rich industrial nations and major emerging markets to set up a shared central database of food prices to help control market volatility and keep commodity speculators in check.
Key measures proposed by Sarkozy to curb commodity price volatility include minimum cash deposits for derivative trades as well as the creation of trade repositories that would be able to keep track of these trades.
The Group of 20 industrial and emerging nations should also rise to the challenge of increasing its food and oil production in the face of rapidly growing demand, Sarkozy said. It should also beef up transparency on stock information so as to help prevent future food crises, he added.
"Global growth has rebounded but rising commodity prices are the main threat to growth," Sarkozy told a conference on commodities in Brussels organized by the European Commission.
Soaring commodity prices are sparking higher inflation in fast-growing emerging economies and risk feeding global imbalances which the G-20 has vowed to eradicate, Sarkozy warned.
Improving the oversight of cash and derivative commodities markets in order to curb price volatility, which risks derailing global growth, is one of the priorities of France as it chairs the G-20 this year.
Sarkozy said it would go a long way toward taming the extreme food price volatility of past years. The G-20 takes up the issue of food prices at a meeting of farm ministers next week.
He said a comparison of farm market prices over the last five years compared with the 15-year period of 1990-2005 shows that price volatility for cereals has doubled, tripled for sugar and is now 4 times as high for rice, "the basic staple for a quarter of humanity."
"Is this right, is this acceptable? Can we put up with this for longer?," Sarkozy asked.
Sarkozy insisted something had to be done about the many hedge funds and specialized financial institutions that have joined the traditional trading houses on the market floor, driving up prices.
"It is time for the G-20 to take its responsibility," he told the conference. He said it was the same lack of regulation now visible in the commodities and raw materials markets that drove the financial markets "to the edge of the abyss" during the 2008 global financial crisis.
"Will we have the same disaster in the world of commodities and raw materials? It is a pretty simple question. We have got to tackle it — now. And not put it off," he said.
To improve transparency and oversight in market movements, Sarkozy wants a centralized register for data transactions in derivatives. He wants trading data to be better available to boost food security and stable markets by cutting out the uncertainties of excessive speculation.
He said the Food and Agriculture Organization of the United Nations could collect and hold all the data, including those on private stocks.
"The point is not to regulate prices, but to make sure that the price-formation process works properly," Sarkozy said.
The French president urged regulators to better scrutinize the interconnections between physical and derivatives commodities markets, so as to avoid price manipulation and market abuse.