An inter-agency task force charged in November 2010 by G20 leaders ‘to develop options … on how to better mitigate and manage the risks associated with the price volatility of food …’ published its report on 2 June 2011, with a long list of recommendations. A collaborative exercise between 10 organisations, the report argues that solutions must be wide-ranging because of the nature of the problem: ‘price volatility and its effects on food security is a complex issue with many dimensions, agricultural and non-agricultural, short and long-term, with highly differentiated impacts on consumers and producers in developed and developing countries.’
Accordingly, the report makes 31 separate recommendations clustered under 10 headings. These are:
- strengthening the longer-term productivity, sustainability and resilience of the food and agriculture system worldwide;
- establishing an Agricultural Market Information System;
- making futures markets more effective;
- strengthening international disciplines on import and export restrictions and domestic support schemes that distort incentives;
- exempting humanitarian purchases from export restrictions;
- removing policies that exacerbate the conflict between the use of agricultural outputs for food or fuel;
- actions to ensure that national stocks and regional emergency food reserves can operate more effectively together in order to mitigate the negative effects of food price surges;
- supporting national consumer and producer safety nets;
- improving risk management; and
- strengthening policy coordination.
In analysing recent events, the report acknowledges that price volatility has been higher during the decade since 2000 than during the previous two decades (and for wheat and rice prices in 2006–2010 compared to the 1970s), but it also counsels that ‘in the long term there is little or no evidence that volatility in international agricultural commodity prices … is increasing’ and that ‘periods of high and volatile prices are often followed by long periods of relatively low and stable prices.’
The report notes the lively debate on whether recent volatility is a result of financial speculation and recognises that ‘investment in financial derivatives markets for agricultural commodities increased strongly in the mid-2000s’. But it remains agnostic on the matter, arguing that ‘more research is needed to clarify these questions’ of whether speculation stabilises or destabilises prices.
Among the targets for criticism are ‘large country trade policies’ which ‘increase world price volatility and create negative externalities for smaller countries’. The report cites the latest data for the OECD countries which indicate that ‘government support still accounts for 22% of the total receipts of agricultural producers and that more than half of that support is delivered in ways that are highly distorting of trade and competition.’ It also criticises the government support policies that have ‘largely driven’ the increases of 2000–2009 in global output of bio-diesel (tenfold) and bio-ethanol (fourfold) at least in OECD countries.
Whatever the causes, price volatility (defined as ‘variations in prices’ that are ‘large and cannot be anticipated’) creates uncertainty, which increases risks. It has serious consequences, especially for ‘poor consumers in less developed countries without access to adequate social support’ since ‘up to three-quarters of their total income may be spent on basic foodstuffs.’ In addition to the obvious immediate impacts there are ‘longer term costs … as spending is switched to less nutritious foods and away from basic needs such as education or health. Typically the effects are felt more strongly by women and children.’
Drafted by ten agencies working together, the G20-commissioned report serves as a guide on how to better manage world price volatility. It offers a detailed description of a large number of changes to current practice that would help the world (and especially countries that have more vulnerable populations and less developed support structures, such as many of the ACP member states) to cope better with food-price volatility, which may get worse as a result of climate change.
In terms of dealing with the regulatory challenges around increased price volatility, the report reflects the difficulties faced in achieving a consensus on the way forward. This gives added importance to debates within ACP regions on how best collectively to respond to price volatility so as to minimise their adverse effects (e.g. from the joint coordination of food reserves to the facilitation of trade in basic food stuffs from surplus to deficit areas within ACP regions).