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G20 commitments on food security to be put to the test?

23 September 2012

In July 2012, the African Development Bank’s Chief Economist and Vice-President for Africa, Mthuli Ncube, warned ‘that a worrying broad-based rise in grain prices fuelled by a severe drought in the US Midwest’ would hurt the world’s poor, including those in Africa. He implied that the effects would be both direct and indirect, with potential social instability undermining Africa’s growth prospects.

However, Professor Ncube expressed the hope that ‘the looming food price squeeze could be less severe than in 2008’, since the response mechanisms to financially assist governments facing ‘sharply higher food import bills’ were now in place. This implicitly referred to mechanisms set in place following the G20 Agriculture Ministers’ meeting in 2011. In this context, the French government, currently chair of the G20, has committed itself to convening a rapid reaction forum of G20 countries in September ‘if upcoming data on grain markets points to serious tensions following drought in the United States and Russia’. This could seek to build on the Agricultural Market Information System (AMIS) for sharing data, set up following the G20 Agriculture Ministers’ meeting ‘to improve transparency in agricultural markets, with the aim of tackling price volatility and ensuring food security’.

Such an initiative to address high grain prices could well be needed. Rabobank analysts argue that grain prices are ‘unlikely to have reached a high, despite setting records in corn and soybeans’. In mid July, Rabobank increased its forecasts ‘for average quarterly futures prices across the grains and oilseeds complex’. This view is endorsed by other analysts. According to Rabobank,  prices are expected to be supported ‘by the deep pockets and nervous governments of developing countries’. That is to say, governments that are fearful of rising prices, and which have the financial capacity to purchase now, may enter the market making large-scale food purchases, with such actions serving to sustain high prices. In this context, Rabobank forecasts for wheat prices have also increased.

Rabobank forecasts for maize prices (quarter average for front month Chicago contract)

Quarter and year Price (US$ per bushel) Change on last Rabobank forecast
Q3 2012 8.00 +US$1.90 per bushel
Q4 2012 7.50 +US$1.50 per bushel
Q1  2013 7.00 +US$1.10 per bushel
Q2 2013 6.75 not available

An additional problem is price volatility, in view of weather-related uncertainties on the actual state of grain crops.

Editorial comment

The June 2011 meeting of G20 Agricultural Ministers’ gave rise to a number of commitments, three of which are particularly relevant in the context of the current high grain prices (see Agritrade article ‘ G20 agriculture ministers agreed on action plan on high food prices’, 27 July 2011). These relate to:

  • the establishment of an early warning system, via the Agricultural Market Information System;
  • commitments on support to food reserves;
  • the creation of instruments to hedge against volatility, notably the Agricultural Price Risk Management Tool.

The emerging food price crisis potentially constitutes the first concrete test of the political commitment of the G20 to the effective operational application of these commitments. Given the scale of the economic difficulties faced in the EU, French political leadership in coordinating a G20 response could well prove invaluable in assisting ACP countries in dealing with the financial, economic and social implications of high food prices. This in turn could reduce the danger of high food prices undermining broader African growth prospects.


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