During a meeting with Tom Vilsack, U.S. Secretary of Agriculture, in early September in the United States, Bruno Le Maire said he was in favour of position limits on European commodity markets in order to curb speculation and contain rising food prices and political instability and famine in developing countries.
"We are ready to move in that direction. Position limits could be a very interesting solution, but not the only one. (...) It is something that we are ready to work on," said Bruno Le Maire. Effectively, it is time for the French Minister of Agriculture to prepare for the 2011 G20 summit which France is to preside. Because Nicolas Sarkozy has decided that the priority of this summit will be commodity market regulation in general, be they “hard” commodities (oil, steel, etc.) or "soft" commodities (agricultural). Incidentally, late August, France submitted detailed proposals to the European Commission requesting joint action for commodity market regulation. France is also expected to meet Great Britain on this subject, even though European commodity markets are mostly based in London.
Position limits will therefore be on the agenda during these discussions, but as Bruno Le Maire pointed out, there are other solutions to combat price volatility. If an increase in uncontrolled financialisation is one of the causes of the large variations in food prices seen over several years, there are other explanations, such as:
• Cyclical: bad weather, epizootic diseases, embargoes and the protectionism employed by certain major exporting countries, such as Russia this summer.
So many topics to be discussed during the next G20 talks, but in the meantime, we are still waiting to hear of the other solutions France as got planned.
• Structural: the microstructures of agricultural markets, highly sensitive and insufficiently reactive to any observed changes in market conditions; an increase in food demand.
• Non-agricultural: the impact of monetary policy (interest rates in the short term) and different currency exchange.