Brussels, 08/11/2010 (Agence Europe) - Monetary and exchange-rate imbalances are jeopardising European agriculture. A study carried out by the think-tank momagri©, which will be published this Tuesday 9 November , shows that the under-evaluation of the dollar compared to the euro gives American agriculture a competitive advantage which has been put at $14.4 billion in 2009, which equates to 50 Airbus A380s. This comes at a time when the “currency war” could end up dominating the G20 summit to be held in Seoul on 11 and 12 November.
The think-tank momagri©, a movement which favours a global organisation of agriculture, explains that “the international community does not take sufficient account of the impact of monetary and exchange-trade imbalances on the agricultural sector”. However, the exchange rate and key interest rates defined by the central banks have become “essential variables of agricultural competitiveness”.
The comparison between Europe and the United States illustrates this: - the under-evaluation of the dollar compared to the euro has given American agriculture an indirect but effective advantage over the last two years over European agriculture, which was put at $17.8 billion in 2008 and $14.4 billion in 2009; - the more advantageous interest rates practised by the American Federal Reserve compared to the ECB (European Central Bank) have translated into an advantage for the American farmers worth $2.9 billion in 2008 and $106 million in 2009. In total, this represents a competitive advantage for American agriculture which was estimated at $20.7 billion in 2008 and $14.5 billion in 2009 (the cost of 50 Airbus A380s!), corresponding respectively to the equivalent of 6.5% and 5% of the value of American agricultural production.
According to Pierre Pagesse (president of Limagrain), who is the head of momagri©, “it is vital to take account of these exchange-rate and monetary variables at the forthcoming G20, because the agricultural markets, which have grown more unstable due to speculation, could bring about a new financial and food crisis. Without taking account of the fact that the threat of unregulated liberalisation of international agricultural trade is still hanging over the WTO”. Christian Pèes, deputy president of momagri©, added that “those suffering the imbalances are under permanent pressure, which is getting worse, particularly in periods of high price volatility”.
Momagri is made up of leading figures from within and outside the world of agriculture (health, development, strategy and defence, etc). Its aim is to promote a regulation of the agricultural markets, by creating new assessment tools (economic model, indicators, etc) and making proposals for an international agriculture and food policy.
Any decision to regulate the financial markets and, more broadly, to reform the international monetary system could have a considerable impact on the international competitiveness of the economic sectors, including agriculture.
“If the exchange rates and monetary policies practised by the various central banks have always had an impact on the export competitiveness of the agricultural sectors, their influence has risen sharply since 2005”, Momagri experts explain. They cite three reasons for this: - increasing recourse to indebtedness on the part of farmers and the debt crisis have given an increased role to the key interest rates defined by the central banks; - the gradual liberalisation of the agricultural markets and the increase in volumes traded have given the interest rate a preponderant effect in organising commercial flows; - the agricultural markets are subject to growing financialisation, making economic and financial variables key decision-making criteria. In addition, “before regulating the financial and financialised markets, we must identify how the competitiveness of other economic sectors, particularly the agricultural sector, is affected by changes to the exchange rate or to monetary policy”, the think-tank explains.
Momagri is carrying out an analysis of the support granted by the States to their agriculture sector, as part of its development project for an “agricultural ratings agency”. An initial report on the EU-United States comparisons will be published in mid-January 2011. It will make it possible to measure direct support (agricultural policy budgets) and indirect support (financial and monetary policies, food aid, etc) to agriculture as practised by the two largest productive regions on the planet.
For more information, visit the website (http://www.momagri.org ). (L.C./transl.fl)