Output not stockpiles key to cap food cost

* More investments needed to increase food

production-Piebalgs

* France proposes agricultural stockpiles to tame food

prices

(Adds background on French proposal, comments on biofuels)

MILAN, Oct 1 (Reuters) – Building strategic agricultural

stocks to curb market volatility, as proposed by France, would

not be the most effective way to tame food prices, EU

Development Commissioner Andris Piebalgs said on Monday.

He said what was needed instead was an increase in food

production in the world’s poorest countries, which remain

vulnerable to the threat of a new food crisis despite the recent

easing in grain prices from record highs hit this summer.

Last month, French President Francois Hollande launched a

global campaign to win support for creating strategic stockpiles

of food commodities after a year of drought renewed fears of a

new crisis in agricultural supplies.

Paris has also called an emergency meeting of G20 farm

ministers for mid-October to discuss ways to curb price

volatility.

“I believe it is one of the instruments but it is not the

most effective,” Piebalgs told Reuters in an interview on the

sidelines of an international cooperation conference in Milan

when asked about the French stockpiles proposal.

“The answer to food insecurity is sufficient food production

in the world’s poorest regions,” he said, adding that increasing

investments in agriculture was the best way to keep a lid on

prices.

“Resilience in farming, access to water, fighting against

climate change, crops, access to the markets – it’s a lot of

elements, one element does not help sufficiently,” he said.

The worst drought in more than 50 years in the United States

has sent corn and soybean prices to record highs over the summer

and, coupled with drought in Russia and other Black Sea

exporting countries, raised fears of a global food crisis like

the one that led to rioting in poor countries in 2008.

Food prices have fallen back in the past few weeks but

Piebalgs said there was no room for complacency.

“Globally, food prices are now not a matter of concern in

the short term but there are problems in the Sahel, continuing

problems in the Horn of Africa and other regions,” he said, also

mentioning Haiti. “The situation remains very vulnerable.”

France first raised the issue of reserves last year as it

chaired the Group of 20 leading economies. But the final deal

limited promises to food aid stocks in countries that might most

need them, a measure that is yet to be implemented.

It is unclear whether Hollande will be more successful this

time round in convincing the United States or his European peers

to rebuild public grain stockpiles that were liquidated decades

ago. Or, as in the case of China, to use existing government

stockpiles more collaboratively to address global issues.

The French proposal, which was backed by the U.N.’s Food and

Agriculture Organisation, did not specify how and where the food

stockpiles would be developed.

Analysts have been sceptical about the idea of reserves on a

global scale because they are costly to run, particularly as

grain has a shorter storage life than commodities like oil.

Piebalgs said he hoped European moves to cap the use of

food-based biofuels would be followed elsewhere, and said there

was a growing consensus, even in the United States, which is a

major biofuels producer, that food crops should first and

foremost feed people.

“We believe that biofuels should be produced from food

residues after crops have been used for providing foodstuff,

then the remains can be tranformed for second- and

third-generation biofuels,” he said.

The EU Commission announced a major shift in biofuel policy

last month, saying it plans to limit crop-based biofuels to 5

percent of transport fuel..

REUTERS