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Early success claimed for G20 AMIS initiative and international coordination

18 February 2013

According to reports on IRIN, the UN humanitarian affairs news service, the Agricultural Market information System (AMIS), a G20 initiative, ‘seems to be working to prevent food price shocks’. This seems to be a result of what the AMIS mechanism did not do in response to rising food prices. It is argued that by declining to convene the Rapid Response Forum established by the G20, AMIS avoided actions that ‘would have sent the wrong signals concerning the gravity of the situation’. According to the FAO Director-General, AMIS ‘helped to prevent panic and to stop the worst drought in decades [in the US] turning into a food price crisis’. It was pointed out that the AMIS system was still under development, but should shortly have in place a database on ‘current food stocks’.

In January, it was reported by Agrimoney.com that ‘price rises were kept in check by a reluctance by governments… to stockpile food supplies, or impose export bans’. An FAO Assistant Director- General, Jomo Sundaram, said that ‘flagging demand in a stagnant international economy, helped ensure the price spike was short-lived, and calmed markets so that 2012 prices ended up below the previous year’s levels.’

This market situation was despite projections from the International Grain Council (IGC) in October 2012 which cut forecasts for global maize production by 5.3% (to 830 million tonnes) and global wheat production by 5.6% (to 655 million tonnes). It was forecast that the production figures would result in a fall in ending stocks of 13.3% and 12.6% respectively, with a tight market situation at the end of 2012.

Similar concerns over European production and exports were expressed in October 2012. According to analysis prepared for The Crop Site, wheat stocks in Europe were being drawn down, with Europe reportedly approaching some form of rationing of wheat for export. Between 2010/11 and 2012/13, ‘European wheat exports are expected to fall from 20.1 million tonnes to 14 million tonnes, with closing stocks falling by 200,000 tonnes.’ ‘A drop in imports of low and medium quality wheat’ is also forecast for the EU as a result of reduced production in the Black Sea area.

Despite a projected rise in US wheat production and the potential emergence of India as a wheat exporter, The Crop Site assessed that ‘worldwide wheat is expected to be less abundant’, while ‘the world is becoming more and more reliant on a global wheat trade’, with this requiring ‘stable relationships’.

Concerns were also expressed in an article on Farming Online about the further concentration of corporate power in the grain sector, following moves by the American food processing company Archer Daniels Midland to purchase Australia’s GrainCorp. This followed ‘major acquisitions by Swiss commodity trader Glencore and Japanese general trading company Marubeni’. According to the article, ‘government officials in a number of Asia’s major importing countries have warned [that the current wave of corporate consolidation] could lead to their importers paying over the odds for essential foodstuffs.’

Despite these concerns and pressures, the FAO reported in January that the FAO Food Price Index was 7% less in December 2012 than in December 2011. It was maintained that better international coordination had been an important factor in averting a new food crisis. 

Editorial comment

With the world becoming more reliant on trade in major cereals, transparent and reliable information on stocks, and demand and supply arrangements for major cereals could potentially play an important role in reducing the scope for speculation and panic buying that artificially drive up cereals prices, e.g. stockpiling by governments in anticipation of further price rises. This could bring significant benefits to net food-importing countries, many of which are located in the ACP.

Meanwhile, a close eye should be kept on the growing corporate concentration of ownership in a sector where the major trading companies ‘already account for around 75% of the global grain trade’, to ensure that markets work efficiently and dominant market positions do not lead to abuses. Internally, within the EU, this has been a focus for initiatives aimed at strengthening the functioning of supply chains, with particular importance being attached to transparent sharing of market information.

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