1) The document discusses how reducing price volatility in global food markets can be considered a global public good that benefits both consumers and producers. 2) It argues that providing this public good requires global governance and policies that are supported by scientific evidence. The role of knowledge is highlighted to help target market imperfections, guide policymakers, and enable fair international trade. 3) The author presents IFPRI as an organization well-positioned to act as a knowledge broker between Africa and other regions to help address issues of global food price volatility and food security.

1. 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

2. David Laborde, May 2011
A global public 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!

3. David Laborde, May 2011
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

4. David Laborde, May 2011
CBOT wheat prices
Page 4
From Torero 2011

5. David Laborde, May 2011
CBOT wheat prices
Page 5
From Torero 2011
Promote transparency

6. David Laborde, May 2011
CBOT wheat prices – IFPRI model to detect
abnormal spikes
0.02
Drought in
Russia began
+
-0.02
-0.1
Locus in
Australia
-0.08
-0.06
-0.04
0
0.04
0.06
0.08
0.1
12/10/2001
5/7/2002
9/27/2002
2/24/2003
7/17/2003
12/8/2003
5/3/2004
9/24/2004
2/17/2005
7/13/2005
12/2/2005
4/28/2006
9/20/2006
2/14/2007
7/10/2007
11/29/2007
4/24/2008
9/16/2008
2/9/2009
7/2/2009
11/23/2009
4/20/2010
Realized
Return
95th percentile
Source, Martins-Filho, Torero, Yao (2010)
Page 6
95th Percentile
Abnormalities
Define and Detect Volatility

7. Public Good #2
David Laborde, May 2011
Global Governance for a fair and
stable trade system

8. Distorted markets: Side effects of subsidies
Reduce existing distortions: Production
and Export subsidies
Promote Aid For Trade measures to
help new exports to step in
RICE
David Laborde, May 2011
• Agricultural markets are
highly concentrated
(Number of exporters,
Number of
commodities)= High Risk
Exposure
• Trade should lead to
specialization BUT
Very high level of
distortions
25%
13%
11%
Wheat
29%
11%
11%
United States
Canada
Australia
Russian Federation
France
Rest of the world
See:
-Laborde and
Bouet 2010,
2011
- Orden et al
2011

9. David Laborde, May 2011
Unstable Trade policies
 Governments try to insulate
their domestic markets from
the world market in period of
crisis.
 Reduction in tariffs, Increase
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
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
Wheat
World
Price
1 – A “Natural” Shock 11%
2 – A “Natural” Shock with
exporter policy reaction 17%
3 – A “Natural” Shock with
exporter and importer policy
reaction
21%
West Africa , wheat shock
Real
income
1 – A “Natural” Shock -0.04%
2 – A “Natural” Shock with
exporter policy reaction -0.07%
3 – A “Natural” Shock with
exporter and importer policy
reaction
-0.08%
Source: Bouet and Laborde 2009

10. New domestic policies = New externalities
 Explosion of biofuel production
and consumption
 Effects on Food/Feed prices and
their volatility
 All Biofuels are not equals (e.g.
Liberalize trade in Biofuels and its feedstocks to avoid
concentration on food/feed related products
ethanol less strong effects on
food prices than biodiesel)
 Large distortions: protection,
subsidies, mandates
Bring more flexibilies in existing policies: eliminate
mandates on biofuels and remove subsidies
 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
David Laborde, May 2011
1400
1200
1000
800
600
400
200
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Thds barrel per day
Ethanol Consumption
Paraguay Virgin Islands, British
Australia India
Colombia Thailand
Canada China
EU27 United States
350
300
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
thds barrels per day
Consumption biodiesel
Canada Australia Norway
Belarus Korea, South Colombia
China Thailand Brazil
United States EU27

11. IFPRI as a knowledge broker with African
David Laborde, May 2011
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.