Knowledge as a First Step Towards Less Volatile Markets by David Laborde at WCAO Launch
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Knowledge as a First Step Towards Less Volatile Markets by David Laborde at WCAO Launch

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"Knowledge as a First Step Towards Less Volatile Markets" presentation by David Laborde at Launch of IFPRI Office for West and Central Africa on 17 May 2011

"Knowledge as a First Step Towards Less Volatile Markets" presentation by David Laborde at Launch of IFPRI Office for West and Central Africa on 17 May 2011

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  • Thursday –August 19 On Thursday, world wheat prices jumped after a report, later denied by the government, that Russia, the world's third largest wheat exporter last year, was looking at importing more than 5 million tonnes of grain this seasonAugust 18th the price of a barrel of crude oil for future delivery was off nearly $2 and went as low as $73.83. The decline came as a government report said the total supply of crude oil and refined fuels in the United States was more than 1.1 billion barrels, the highest level in the last two decades.
  • Thursday –August 19 On Thursday, world wheat prices jumped after a report, later denied by the government, that Russia, the world's third largest wheat exporter last year, was looking at importing more than 5 million tonnes of grain this seasonAugust 18th the price of a barrel of crude oil for future delivery was off nearly $2 and went as low as $73.83. The decline came as a government report said the total supply of crude oil and refined fuels in the United States was more than 1.1 billion barrels, the highest level in the last two decades.

Knowledge as a First Step Towards Less Volatile Markets by David Laborde at WCAO Launch Knowledge as a First Step Towards Less Volatile Markets by David Laborde at WCAO Launch Presentation Transcript

  • Knowledge as a first step towards less volatile markets
    David Laborde
    Senior Research Fellow
    Markets Trade and Institutions division
    International Food Policy Research Institute
    Panel discussion “Rising global food prices: Causes, Impacts, and Response Strategies”
    Dakar, May 17, 2011
  • A globalpublic goods story
    Reducing price instability is a global public good
    Benefits consumers and producers
    On the short run and the long run (less risk = more investment)
    As any public good, how to provide it? Who is going to pay for it?  Global Governance
    Do we need policies?
    Yes, if they are supported by scientific evidences
    Promote the few good ones, deter the others
    Role of knowledge to
    Target and reduce market imperfections (e.g. asymmetry of information)
    Provide right signal to policy makers
    Build the global governance and promote enlightened negotiations (e.g. trade rules)
    Information and a safe and fair trading system are global public goods too!
  • New York Times "No Wheat Shortage, but Prices May Rise"
    Financial Times
    Russia grain export ban sparks price fears
    Published: August 5 2010 10:50
    Voice of America "Wheat Prices Soar after Russia Bans Exports"
    WSJ
    Wheat Prices Hit 2-Year Highs Following Russian Ban Aug 5, 2010
    Economic Times (India) "Russian Crisis Won’t Impact Global Wheat Supplies, Prices" The Diane Rehm Show (USA) "World Wheat Supplies" Radio France Internationale, English to Africa service "Russia Wheat Ban Raises Food Security Fears" Radio France Internationale, Latin America Service Asia Sentinel "Is Another Food Crisis Coming?"
    BBC World News America "From Farmers to Bakers: What the Wheat Shortfall Means“
    Financial Times
    Prospect of Russian grain imports lifts wheat
    Published: August 19 20
    Bloomberg
    Wheat Prices Jump Most in Week as Argentina, Russia Crops Hurt by Drought
    Public Good #1
    Relevant and accurate Information
  • CBOT wheat prices
    From Torero 2011
    Page 4
  • CBOT wheat prices
    Promote transparency
    From Torero 2011
    Page 5
  • CBOT wheat prices – IFPRI model to detect abnormal spikes
    95th Percentile
    Drought in Russia began
    +
    Locus in Australia
    Abnormalities
    Source, Martins-Filho, Torero, Yao (2010)
    Define and Detect Volatility
    Page 6
  • Public Good #2
    Global Governance for a fair and stable trade system
  • Distorted markets: Side effects of subsidies
    • Agricultural markets are highlyconcentrated (Number of exporters, Number of commodities)= High Risk Exposure
    • Trade should lead to specialization BUT
    Very high level of distortions
    Reduce existing distortions: Production and Export subsidies
    Promote Aid For Trade measures to help new exports to step in
    RICE
    See:
    • Laborde and Bouet 2010, 2011
    • Orden et al 2011
  • Governments try to insulate their domestic markets from the world market in period of crisis.
    Reduction in tariffs, Increase in export restrictions when price go up.
    Large economies policies have a high cost for small countries
    Global trade system has to be protected at all cost for ensuring that trade plays is role in the food security strategy
    Unstable Trade policies
    Promote global governance rules (e.g. WTO Doha Round) that limits exports and imports restrictions
    Delicate trade-off between country sovereignty and a “one” world vision
    Role of Regional Integration
    Source: Bouet and Laborde 2009
  • Explosion of biofuel production and consumption
    Effects on Food/Feed prices and their volatility
    All Biofuels are not equals (e.g. ethanol less strong effects on food prices than biodiesel)
    Large distortions: protection, subsidies, mandates
    A collection of bad policies that create negative externalities for Food/Feed consumers without maximizing environmental gains
    See Al Riffai, Laborde and Dimaranan 2010, Laborde 2011
    New domestic policies = New externalities
    Liberalize trade in Biofuels and its feedstocks to avoid concentration on food/feed related products
    Bring more flexibilies in existing policies: eliminate mandates on biofuels and remove subsidies
  • IFPRI as a knowledge brokers with African partners
    A long partnership
    New channels:
    www.foodsecurityportal.org
    New opportunities:
    The AGRODEP project as a support to CAADP
    Next workshop in June in Dakar with sessions on methodologies to address Food prices.