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

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.

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

by International Food Policy Research Institute (IFPRI)

Accessibility

Categories

Upload Details

Usage Rights

Statistics

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