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A Private Sector View of Food Security & Price Volatility

A Private Sector View of Food Security & Price Volatility. Malcolm Bailey. May 2014. Components of food security. Trade policy settings can have significant implications for food security and price volatility. EU export subsidies. Argentina export bans. India export bans.

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A Private Sector View of Food Security & Price Volatility

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  1. A Private Sector View of Food Security & Price Volatility Malcolm Bailey May 2014

  2. Components of food security

  3. Trade policy settings can have significant implications for food security and price volatility EU export subsidies Argentina export bans India export bans Source: Worldtariff.com Note: Tariffs are MFN or outside quota rates as appropriate. Specific and compound rates have been converted to ad-valorem at an assumed SMP price of USD 4,000 per tonne

  4. Use of food stocks as a policy tool is a costly and inefficient approach to food security Diversion and leakage of below poverty line (BPL) public distribution stocks, India Source: World Bank Report (2011) – Social Protection for a Changing India

  5. Policies such as export subsidies suppress price signals, impacting investment in agriculture Impact of EU export subsidy on WMP price Source: Fonterra analysis

  6. Price volatility remains an issue affecting dairy products Commodity Dairy Prices Source: USDA Oceania Series

  7. But dairy is not alone in experiencing price increases and price volatility Price Index Trends for Agricultural Raw Materials, Metals, Crude Oil Source: IMF Commodity Price Indices

  8. Dairy price volatility has been driven by a range of factors Dairypolicy Strong demand for dairy across Asia Volatility Foreign exchange rates Supply shocks,i.e. weather, disease Competing usesfor grains

  9. Price risk management tools are needed to ensure that global food markets function effectively

  10. Summary • Food security is a major, global, challenge for the 21st century • A function of farming efficiency and of efficiency in moving food from areas of abundance to areas of need • Food security is also influenced by the trade environment • Trade policy settings such as export subsidies can have a major impact on food security, suppressing price signals and impacting investment in agriculture • Rising price volatility in food remains an issue, and such trade policy settings can also negatively impact price volatility on the international market • Market-based price risk management tools and responsive pricing signals (like GDT) are important for managing the inherent volatility in agricultural markets and ensuring that global food markets function effectively.

  11. Thank You

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