Managing Food Price Volatility for Food Security and Development

  • Gérard F. (CIRAD), Alpha A. (GRET), Beaujeu R. (IRAM), Levard L. (GRET), Maitre d’Hotel E. (CIRAD), Rouille d’Orfeuil H. (CIRAD), Bricas N. (CIRAD), Daviron B. (CIRAD), Galtier F. (CIRAD), Boussard J.M. (Académie d’Agriculture)
  • External publication, Studies and reports
  • Editor : Grema
  • Language : Anglais
  • Year : 2011
  • 163

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The fight against the price volatility of agricultural and food products and, more generally, public intervention in agricultural markets are longstanding subjects of debate among academics and the government authorities of various countries equally. Trade and market regulation are the crux of this debate between those in favor of liberalization in the strict sense and the supporters of intervention or of more or less moderate regulation. Other actors’ organizations (such as farmers’ and consumers’ unions, local and multinational companies, and NGOs in different fields) are involved. This is because the level and instability of agricultural and food prices have considerable consequences for all citizens of the world and in particular for those near the poverty line. Indeed, for poor consumers, a sharp rise in prices means entering a situation of hunger and/or indebtedness, and for poor farmers, a drop in prices begins or speeds up a process of impoverishment, loss of land if the farming household was forced to mortgage its last assets, and ultimately eviction. Every year, more than twenty million people find themselves pushed out of farming in this way and join already saturated urban areas and labor markets. It is not surprising, in this context, that, for years, this issue has stood as a major obstacle in international trade negotiations.

In the spring of 2008, the sharp rise in prices, which hit the urban poor hardest, sparked riots in many cities in developing countries close to national and international authorities and under the eyes of television cameras. According to the FAO, one hundred million more people were added to the hunger statistics in 2008. The specter of hunger reared its head, and the debate on markets was revived. The shunned idea of regulation and public intervention re-emerged in forums and at the very center of international negotiations. Accountability was demanded of the international organizations in charge of agriculture and food; and, to sustainably raise the issue of food security at the highest level, the G8 and United Nations began to elaborate a “Global Partnership for Food Security.” This lead to the opening up of the FAO’s Food Security Committee (FSC), the mobilization of global expertise by creating a panel of high-level experts, and additional financial efforts devoted to the development of food crops. For its part, the G20 has expressed alarm at the deregulation of markets, first the financial markets, then the commodities markets and finally the agricultural markets. France, which assumed the presidency of the G20 in November 2010, included the issue of regulation in these three—closely correlated—fields on the agenda for the next summit.

The Groupe de Recherche et d’Échanges sur la Régulation des Marchés Agricoles (GREMA, agricultural market regulation research and exchange group) was created by NGO activists and scientists somewhat in the minority at the end of 2004 to elaborate the positions to take and arguments to defend in the process of preparing for the WTO Ministerial Conference in Hong Kong (December 2005). Five years later, against the backdrop of a serious blockage of WTO negotiations, GREMA has found itself involved in a debate on market regulation that is now more open and has been introduced within the G20 by some member countries. GREMA’s study, delivered to the French authorities prior to the G20 presidency, offers analyses and proposals elaborated based both on theoretical reflections and the observation of experiments with regulation attempted in approximately fourteen countries. This report is an extension of other studies that were previously conducted in a similar vein, notably the study produced by the ECART group (Galtier et al. 2009). However, let us point out that, well before the 2008 crisis, while the major international order-givers and most governments, relying on pro–free trade convictions, affirmed the dangers of public intervention in the life of markets and denounced the upsets introduced in their natural tendency towards optimal equilibrium, the same could not be said of other actors concerned by the organization of agricultural trade, starting with agricultural farmers’ organizations and international solidarity associations who saw the damages in the field caused by the policies inspired by an uncompromisingly liberal doctrine. Nevertheless, the liberal discourse of governments coincided often poorly with the policies implemented and negotiating positions. If any proof is needed, it suffices to review the stages in the trade negotiations over the past decade and a half, for instance the WTO Ministerial Conferences, and examine the tones successively adopted In each of them: 1994 in Marrakesh, end of the Uruguay Round, creation of the WTO and announcement of the launch of a new negotiation cycle; 1999 in Seattle, failed launch of this new cycle, informal alliance between developing countries and non-governmental actors within a movement described as “anti-globalization” before it adopted the term “alter-globalization”; 2001 in Doha, one month after the events of September 11, obligatory statement of good intentions but without results; 2003 in Cancun, new blockage; 2005 in Hong Kong, timid proposal of a negotiation framework and methodology; then no forward movement until July 2008 in Geneva where, during a special meeting, India came out of the woodwork and, with its alliances (notably with Brazil), blocked the negotiations by demanding the right to invoke a safeguard clause in the case of market surges—a demand that was refused. Since then nothing, dead calm on the negotiating table, and attention has shifted to how the food crisis was handled, to the need to reformat the international mechanisms in charge of food security, and to the search for practical solutions to enable markets to operate properly. This report aims to find answers on this last point.

More precisely, this book addresses the following questions:

–          In which cases is markets regulation desirable? Is it necessary to allow a real improvement in food security in world poorest countries?

–           Is it feasible? Which conditions have to be fulfilled? Which modalities will be best adapted according to specific contexts? Which kind of institution and capacity building should be promoted?

These topics have already been analyzed in a large number of academic studies. Several experiences have been undertaken over the last fifty years. Yet,  the question is still highly controversial. Here, we proceeded in two steps (i) Combining theoretical and empirical approaches to summarize the main arguments for and against public intervention, (ii) a two days workshop followed by a one day seminar to allow intensive exchanges between experts, scientists and policy makers with contrasted positions and to present the main finding to a larger audience.

To reflect this approach, this book contained four parts. Part A discusses the main arguments justifying or denying direct public intervention on markets, the factors of successes and the main reasons for failures. It combines academic and empirical approaches.

Part B is made of the minutes of the seminar held the 1st December 2010 in Paris, a contribution of Peter Timmer( emeritus Professor, Harvard University) on the main conclusion to be drawn from the debates, and a detailed picture of actors’ behavior along the commodity chain in Burkina-Faso and its implications for market regulation realized by inter-réseaux. It also supplies web links to the presentations of Philip Abott (Professor at Purdue University (USA), Andrew Dorward (Professor at The School of Oriental and African Studies, (University of London), F. Gérard (CIRAD) Maximo Torrero (IFPRI), Kako Nubukpo (Professor at the University of Togo).

Part C contains  the abstracts (and the web links to the main texts )of a set of seven notes, each of them presenting a subject related to public intervention on agricultural markets,. Similarly, Part D is made of the summaries of the fourteen case studies which have been analyzed in this project, as well as the web links to the corresponding full text.

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