Knee-jerk reaction to drive prices up: NFF

Posted by Editorial on 3rd June 2008

In the midst of an escalating global food crisis – precipitating riots in several countries – the National Farmers Federation (NFF) has outlined their worries about the “knee-jerk leap” to trade distorting policies by foreign governments.

The NFF, peak industry body for Australian farmers, believe the decisions taken are simply misguided attempts to reduce domestic prices. “In response to high food prices, some Governments have counteracted with short-sighted policies to restrict food exports in an effort to bolster domestic supplies,” NFF Vice-President, Charles Burke, said. “Farmers in Argentina, Kazakhstan, Egypt, the Ukraine and Vietnam, among many others, are actually discouraged from boosting their production to meet world demand owing to poor policy decisions by their Governments. These actions are, in effect, exacerbating and drawing-out the global shortage of food.”

The May Westpac-NFF Commodity Index recorded a global shift – dropping 5% – as buyers delay purchasing stock.

“With the northern hemisphere wheat harvest drawing closer, international Governments are hoping prices will continue to ease as production increases, particularly developing nations struggling with the increased price of food,” Mr Burke claimed. “Egypt, Morocco, Senegal, Cameroon, Haiti, Indonesia and the Philippines have all seen violent riots and mass protests as their people struggle with high agricultural prices and a lack of supply. Despite softening slightly this month, agricultural commodity prices remain 22% higher than this time last year.”

The NFF, longstanding advocates of free trade, have outlined their disappointment with the decisions. “Those politically weak and ill-advised policy decisions, which saw Doha stall, are now coming home to roost,” Mr Burke asserted. “Trade distorting subsidies, tariffs and other artificial trade barriers mire all production and send the wrong market signals – a sure-fire way to create dangerous situations of under- and over-supply, while breeding inefficiencies within the sector.”

“Until recently, the net effect of irresponsible protectionist government intervention has driven over-supply, distorting markets and driving the global price of agricultural produce down to, in many cases, unsustainable levels. However, over the past few years, the global market has drastically turned to under-supply. Amid muddied market signals caused by world agricultural domestic support policies and trade barriers – especially in the European Union, the United States and other developed countries – the global farming community is actively prevented from responding to the food crisis in a timely fashion.”

The NFF now believe government intervention restricting trade is exacerbating the problem and suggest that it underlines the need for governments to rekindle the World Trade Organization’s Doha Round of global trade reform.

“Ending this farcical and dangerous charade is now critical,” Mr Burke concluded.

The National Farmers Federation also outlined the dire need for rain over the coming weeks in order for a good winter crop to result. “Australian farmers, grappling with the ongoing drought, an exceptionally high Australian dollar and mounting fuel and other input costs, are hoping for rain over the next five-week window to get out a winter crop and get their stock on the world market,” Mr Burke said.