As surging food prices spark riots in parts of the developing world, mixed signals are emerging from both the United Nations and the Indian government on the role of markets in the pricing and distribution of food.
India, for example, is in the process of implementing reforms to the 1952 Forward Contracts Regulation Act (FCRA) designed to provide open, fair, and regulated markets, but Finance Minister Palaniappan Chidambaram said in early May that he might support a ban on all food-related futures trading in India.
The call for such a ban comes at a sensitive time for the reforms, which have been approved at cabinet level but not yet enacted by parliament. Straw polls carried out in January indicated more than enough parliamentary support to enact the rules, but P. H. Ravikumar, who just stepped down as managing director and CEO of the National Commodity and Derivative Exchange (NCDEX), says there’s still a chance they could be derailed.
Forward Markets Commission Chairman B.C. Khatua says the new rules are designed to remove markets from the political arena in the short-term, giving his agency, which is subject to periodic renewal like the CFTC in the United States, the authority to approve new products, as well as to investigate and prosecute shady futures operations.
Meanwhile, delegates to an April meeting convened by the UN World Food Program in Berne, Switzerland, have declared the global food crisis a “silent tsunami” that could put hundreds of millions of people at risk of starvation. Unlike past meetings, however, the discussion focused on underlying demand issues, such as the growing demand for ethanol, rather than on markets per se. As the two-day meeting adjourned, delegates criticized the EU for mandating ethanol use and called for more food aid.
Disturbingly, another UN meeting, this one a closed-door affair sponsored by the UN Conference on Trade and Development (UNCTAD), focused on the re-implementation of food boards in developing countries to stem the high prices, according to an attending delegate.
It’s not clear how far such talk has progressed, but such a policy would be a reversal for UNCTAD, which had long promoted clear, open and fair markets in the developing world. Indeed, UNCTAD was a driving force behind the recently-launched Ethiopian Commodities Exchange, and two high-ranking former UNCTAD staffers are now working for the Multi-Commodity Exchange of India.
