Sarkozy and commodity prices

French President Sarkozy has used his time as the head of the G20 to push for a concerted effort among developed countries to reduce commodity inflation. This focus has been on three major areas: 1. better information sharing concerning food production, 2. an overhaul of derivatives markets to reduce speculation and increase transparency; and 3. increases in production to reduce any shortfall.

Is this going to stop commodity inflation? No. Inflation is a monetary phenomena. Is this going to solve higher food prices? Unlikely. The higher food prices of the last few years was caused by a combination of bad weather and poor investment in supply. The government cannot solve these problems. Better information on production will help. Better oversight of derivatives is useful. Increases in production are the most helpful support for commodity prices, but it is unlikely to come from government policies among the G20. Policies to lower food prices and farmer income have not had strong support.