Global food reserve idea faces huge obstacles

By Dmitry Zhdannikov and Amie Ferris-Rotman

ST PETERSBURG, Russia (Reuters) - Tough logistics and questionable efficiency are only a few drawbacks to creating the world food reserve proposed by the G8 as a cushion against high prices, sudden shortages and volatile production.

Many participants in this weekend's World Grain Forum in St Petersburg said the obstacles were so big that it could take years for the reserve idea to materialise and, even if it does, it will most likely take a regional rather than a global form.

"Grain reserves are overly complicated. They cost too much and, in fact, history has shown they don't work," said Michael Michener, administrator of the U.S. Department of Agriculture's foreign agricultural service.

G8 farm ministers, meeting in Italy in April, discussed the merits of buffer grain stocks as an emergency food facility and a means to curb speculative commodity trade.

"If the WFP (the United Nations' World Food Programme) wants to do it on a national basis that is fine," said Michener. "But we would simply say that a broad international, either physical or virtual, reserve is too problematic," he added.

Russia, home to almost one-tenth of the world's arable land, was showcasing its role in global food security by hosting the inaugural World Grain Forum, an idea tabled by President Dmitry Medvedev at a summit of Group of Eight leaders last July.

On Sunday, Agriculture Minister Yelena Skrynnik said Ukraine and Kazakhstan should join Moscow to improve infrastructure and create a Black Sea trade bloc with the potential of becoming the largest grain exporter in the world.

"This precedent may become the first step to forming global grain stocks and create a model of managing food reserves," Skrynnik said, adding the pool would help reduce price volatility and the market's dependence on speculative trade.