Sarkozy says G20 will combat high food prices

French President Nicolas Sarkozy will use his leadership of the G20 this year to try and tame runaway food and commodity prices.

At a news conference in France, Sarkozy laid out his priorities for the international group this year. He holds the G20 presidency through 2011.

In addition to a much discussed tax on financial transactions, Sarkozy hinted at getting the international body to target runaway commodity and food prices.

"How can you explain that we regulate money markets and not commodities?" he was quoted by Reuters as saying.

"If we don't do anything we run the risk of food riots in the poorest countries and a very unfavourable effect on global economic growth," he said. "The day there are food riots, what country at the G20 table will say this does not concern them? I don't see a single one."

The French president was short on details on how a global lowering of food prices might be achieved. Unlike other commodities, food prices are linked to supply and demand concerns from all corners of the globe.

France is the largest grain producer in the European Union, and his sabre-rattling on food prices could be a ploy to curry voter favour in the run-up to a general election in 2012.

Wheat prices rose sharply last year, as a combination of flooding and droughts in some of the world's major grain exporters ate into supply.

Cocoa export ban

Cocoa was the latest commodity to be thrown into price turmoil on Monday as the government of Ivory Coast — the world's largest producer of the beans — called for a one-month export ban.

The export ban was proposed by Alassane Ouattara, the man recognized by the global community as having won a recent general election in the country, as a move to choke off funding for the incumbent, Laurent Gbagbo, who has refused to concede defeat.

Cocoa futures on the Liffe commodities' exchange in London were up 3.9 per cent Monday to 2,223 British pounds (the equivalent of roughly $3,530 Canadian) per ton, the highest since early August, after trading as high as 2,290. Cocoa traded as low as 1,770 pounds per ton in November.

Prices have risen 12 per cent since Jan. 5, according to a research note from Commerzbank.

Ivory Coast exported $2.53 billion US worth of cocoa in 2009, roughly one third of global supply, so a temporary halting of exports is bound to send prices even higher.

"Prices will go up because cocoa is now more expensive," Mintel food analyst Marcia Mogelonsky said.

The head of the European Central Bank also warned on rising prices Monday. In an interview with the Wall Street Journal, Jean-Claude Trichet urged policy makers to keep a firm eye on inflation and make sure higher food prices don't become endemic.

"All central banks, in periods like this where you have inflationary threats that are coming from commodities, have to … be very careful that there are no second-round effects," on domestic prices for food and other things, Trichet said.

Beyond food, prices for base materials such as copper, nickel, coal and iron ore are also nearing multi-year highs. Oil prices have gained nearly a third in the last four months of 2010 alone.