Leaders of the G-20 countries are committed to addressing food security issues at their summit in Cannes, France on November 3-4. Agriculture Ministers have those items on the agenda for their meeting on June 22-23 in Paris. Senior officials from the agriculture ministries met in Paris on May 11-12 to begin to thrash out their positions. Their discussions drew from a document Price Volatility in Food and Agricultural Markets: Policy Responses prepared by ten international organizations including the FAO, विश्व व्यापार संगठन, World Bank and OECD.

 

When G20 leaders met in Seoul, South Korea in November 2010 they requested the ten groups work with key stakeholders “to develop options for G20 consideration on how to better mitigate and manage the risks associated with the price volatility of food and other agriculture commodities, without distorting market behavior, ultimately to protect the most vulnerable.Early in the introduction to the report a critical point was made, “It is important to distinguish between policy options designed to prevent or reduce price volatility and those designed to mitigate its consequences.Both types of programs were discussed in detail. The report’s authors crafted ten policy recommendations that span a broad range of options.

The first one was “to take comprehensive action to strengthen the longer term productivity, sustainability and resilience of the food and agriculture system world-wide.Without continued increases in productivity per unit of inputs, every year will be a crisis year. Closely related was a recommendation to build on existing systems to create an Agriculture Market Information System including “timely and accurate data on food production, consumption, and stocks.Transparency in futures markets was also recommended, as was reconsidering production and trade of biofuels. Risk management for producers and consumers was also included.

The other recommendations dealt with trade in food and stocks holding activities. The authors recognize the role of trade, “trade is an excellent buffer for localized fluctuations originating in the domestic marketand “world output of a given agricultural product is far less variable than output in individual countries.To achieve the benefits of markets, importing counties need to recognize these benefits and exporters must commit to keeping markets open. The G-20 countries are encouraged to use the Doha Round of WTO trade policy negotiations to improve market access, reduce trade distorting domestic supports and eliminate export subsidies. The current requirements for notification of intentions to impose export restrictions should be enforced and strengthened to limit their use.

An additional separate recommendation was made for food aid, “to allow purchases of humanitarian food, especially by WFP (World Food Program), to be exempted from food export restrictions and/or extraordinary taxes.” में 2008 तथा 2010, WFP and other aid providers had to find alternative supplies and paid higher total costs. Buffer stocks program are still important in some developing countries, most notably China and India, but are generally not used in developed countries. The authors note that the operational costs of buffer stocks program are significant. Stocks are often released too late to influence market prices or safeguard food security. Stocks need to be rotated to maintain quality and can disrupt normal market activity. Access to credit for farmers, cooperatives and private traders to build storage and hold stocks may be a more effective way to increase grain holdings. Smaller emergency reserves targeted to low income consumers may be more cost effective than buffer stocks that affect the entire market.

The recommendation for the G-20 countries was to recognize that the primary responsibility for stocks holding is with individual countries, with the G-20 countries providing support to increase capacity for emergency reserves and supporting efforts of the WFP. Also recommended was a code of conduct created by international organizations to ensure the free flow of humanitarian food supplies.

While physical supplies of food staples are important in times of price volatility, governments also need additional funds to help farmers buy higher priced inputs and to help low income consumers maintain adequate diets. The World Bank created in 2008 a Global Food Crisis Response Program to provide rapid assistance to vulnerable countries. The recommendation was for the G-20 governments to support international programs to help low income countries during food price crises and support development of cost-effective national safety nets.

The report ends with a tenth recommendation that, “the G-20 should support the proposals made throughout this report to strengthen policy coordination in relation to food price volatility…” The authors envision the existing Committee on World Food Security, which serves as a forum in the UN for review and follow-up of policies concerning world food security, to coordinate much of the proposed work.

The recommendations will be useful if free trade is not interrupted when exporters have short crops or overburdened when importing countries misjudge market conditions. The authors noted, “Though stockholding is a necessary component of a well functioning market, in particular to smooth out seasonal fluctuations and time lags in trade, year-to-year variations in domestic production can be more effectively and much less expensively buffered by adjustments in the quantities imported or exported.

Individual country stockholdings is not the best policy, but it will be the norm if regular importing countries and those who import after short crop years believe that supplies will not be available because of export barriers and panic buying by importers. Buyers and sellers will be losers as markets become more volatile when surpluses are dumped after good harvests and horded at the first sign of short crops.

Reaching consensus in the G-20 will not be quick, with Russia having imposed a wheat export ban last year after a drought and Saudi Arabia, Indonesia and other major importers uneasy about supplier reliability. These issues can no long be pushed to the sidelines while dealing with other problems.