A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
Personal accounts

International food demand must urgently become solvable

Interview of Frédéric Descrozaille,
General Manager of Interfel

Today the General Manager of INTERFEL (Fruit and Vegetables Inter-professional Association) Frederic Descrozaille is a committed and atypical actor in the agricultural world, as Momagri was able to observe it.

Holder of an Agro and Political Science degree, he completed his education with studies in Philosophy. Since he started working in the agricultural world (CFCA, APCA, CNJA, FIVAL …), he has strived to develop his thoughts, particularly through the analysis of the international monetary system and its interactions with the agricultural world. Former student of Marcel Mazoyer of Agro School, he established a friendly relationship with him which gave him the opportunity to improve his knowledge of the agricultural and food issues.

Former General Manager of the CNJA (Young farmers National Association), he contributed to the publication of the orientation report « Farmers of the world: the price of our future » in 2001 which started a whole new way of thinking. Thus, measuring the destructive effects of the competition between very different types of agriculture, the then forerunning young farmers pleaded in favour of an organisation of agricultural markets around regional blocks of countries with comparable productivity levels. He also collaborated to Jean-Luc Duval’s book “The end for farmers, hunger in the world” » (Cherche-Midi), when Jean-Luc Duval was General Manager of the CNJA.

Frédéric Descrozaille’s interview highlights the need to protect farmer revenue in order to make international food demand solvable and deciphers the links between international agricultural and money markets, allowing us to better understand the current food and financial crisis.

For several years, in the context of your thinking process on the future of agriculture you have been « ringing the alarm bell » concerning the international financial system fragility. Why ?

To start because I was far from being the only one and that, at my level, I had only understood the messages of such economists as Krugman, Stiglitz, Rogoff, Galbraith Jr. or closer to us Cohen or Larrouturou.

What is specific in my approach is what got me interested in the monetary stakes: a reflexion on the economy of agriculture. I have been convinced for many years that the problem of agriculture all over the world is the massive insolvency of international food demand. And, this insolvent demand is essentially farm-based. Paradoxically farm revenue must thus be protected so that non-solvable food demand becomes solvable.

However, the problem which then arises is one of financing an inevitable food price increase. It was the work on the financing issue which led me to work on the monetary question.

It appeared to me that our international monetary system doesn’t really go back to the Bretton Woods agreements signed in 1944 which created the IMF in particular, but to the Jamaica agreements signed as late as 1976. The IMF status reform adopted at this time essentially consisted in eliminating the reference to the Gold standard, to introduce floating exchange rates and completely liberalise capital movements.

Theoretically this reform was based on the work of Milton Friedman who demonstrated exactly the contrary of Keynes : whereas Keynes had established that printing money had a impact on trade reality, Friedman demonstrated that printing money only had an impact on the general price level. If we are sitting in the monetarist seat in Friedman’s position, then money printing should be privatised and Central Banks should become independent, so as to follow a single assignment, to fight inflation.

As a result of this reform, no country in the world, member of the IMF, can promote a Keynesian policy, except for the USA who financed their most important budgetary efforts (star war under Reagan, first Gulf war, in particular the war in Iraq) through an international capital drain, caused by the increase of the leading Federal Reserve rate.

But the Fed’s manoeuvring capability has shrunk over the years. Whenever it needs to call on capital, it takes the risk of strangling consumption and investments which both essentially rely on credit on the American territory. This is precisely how the subprime crisis was started: by increasing this rate from 0,5 to 5,75 in less than 6 years, essentially to finance the war effort in Iraq.

But when it needs to ease relations between banks, it takes the risk of excessively decreasing capital profitability on the American territory. Today, the Fed’s leading rate came back to 1. The real problem is that it won’t be able to go any lower than 0.

If the leading rate stands at 0,5 as in the year 2000, or lower than the inflation rate (which is already unheard of in real terms), and that relations between banks still haven’t eased due to the non-absorption of toxic assets, then the risk will be to see Triffin’s prophecy come true : an inversion of capital flows across the US borders and the collapse of the dollar in uncontrollable proportions.

This is why, from what I understood of these issues, we can still fear that the current financial crisis is but the appetizer of an unimaginable economic and social crisis.

In 1929, the agricultural crisis preceded the financial crisis. What are for you the links between the food crisis which affected several countries at the beginning of the year and the current financial crisis?

At first sight there is no link. The food crisis was mainly caused by the end of a campaign stocks decrease, which greatly shrunk before it started. Simultaneous crop shortages in several export regions of the world were enough to trigger a massive speculative movement on agricultural raw materials. Mazoyer had been predicting this phenomenon for years.

But if these speculative movements can have such an important impact, this is due to our international monetary system. At the end of the 90’s and beginning of the years 2000, there was talk about the “new economy” which admitted appearance came along with speculative investments in the famous “start-ups”. Its enough to listen to RFI to understand that these investments then focused on the raw materials markets consumed by the so-called « emerging » economies, of which China which supposedly was to feed a double-digit growth.

Agricultural raw materials were but a temporary godsend, while crop end stocks were being reconstituted. By the way, this price blaze won’t last much longer than the previous one in the mid-70’s, which the same Mazoyer had also predicted. We can therefore unfortunately bet on the fact that in the coming 12 to 18 months a ton of wheat will come down below the 60 euro threshold.

It stays clear that international agricultural markets and money markets are closely related. The history of contemporary international agriculture and that of money mix like a true macramé. Since the signing of the Jamaica agreements, financial investments where land is most accessible and labour the cheapest are facilitated. In the 80’s, these investments turned rather poor countries’ agriculture, such as those of South America, technically as productive as those of Europe or the USA. But the Argentinean Pampa workers’ salaries peaking at 3 dollars per day, with no additional charge responding to any kind of legislation or social security, so to say inexistent, turn these agricultures into the most competitive in the world.

The whole problem comes from the fact that these countries need to export to attract foreign currencies and pay-back their international creditors: instead of feeding their own population, massively insolvable, they ask the WTO for the opening of the large solvent markets of the world, of which the European Union.

But its a vicious circle : these countries are competitive due to a ruined peasant workforce the cost of which is indexed on that of food, itself on the way down due to their competitiveness… this system generates more insolvency than revenue. As long as manoeuvring margins in the area of agricultural or monetary policies are not re-introduced in these regions of the world, the situation can only deteriorate.

What are the learnings to be drawn from this crisis for the future of agriculture?

Only one: for once what’s urgent and what’s important overlap… this is extremely rare and not even a good sign. In fact the situation couldn’t be more catastrophic. We are maybe still on the eve of a crisis of an amplitude with no precedent in history.

More pragmatically, the first lesson is that of the absolute necessity to work at an international level. From this point of view, French agriculture is heartbreaking: it still needs to go through its Copernican revolution, and stop believing that the European Union is all about her. It’s urgent to establish alliances and to build an international platform which will take into consideration a common diagnostic.

The second lesson is to come to a consensus, beyond the diagnostic, around an agricultural income protection principle everywhere in the world. And the third lesson is to link this breakdown into large common agricultural markets protected at their borders, to a reform of our international monetary system, which will allow financing of the progressive food price raise, as agricultural prices are increased, through budget mechanisms of a Keynesian type.

We could imagine, to avoid waiting for such ideas to come to the forefront, the creation of a second IMF : an IMF for agriculture and food. This would allow us to start with what’s more urgent and it doesn’t seem unrealistic to me : the CAP was set up without such a monetary unification and then enforced by applying green rates, in the context of uncontrolled monetary competition. Mendès-France had hinted at the need to create a unique currency as early as 1930... and the subject was back on the table in 1964, at the time when Mansholt was European Commissar for Agriculture. Doubtless that this was utopia, but what’s important is that this didn’t stop the move forward.

Today, most certainly, from any point of view, the »world must be reinvented ». But certainly sales continue during the works…for it’s unfortunately a luxury we cannot afford.
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Paris, 19 June 2019