I’m in Rome to talk about volatility (my powerpoint here). More precisely, the volatility in agricultural commodity markets and what can be done to a) mitigate it and b) better cope with its consequences.
The topic was part of one of three issues the first meeting of the revamped FAO Committee on World Food Security (CFS) has on its agenda. It will be one of the first topics to be addressed by the High Level Panel of Experts created as part of the revamped CFS structure. It’s also an issue close to the French government’s heart, as it made clear in the short speech given yesterday by France’s Minister for Agriculture. France’s President Sarkozy has committed to making agriculture a central part of the agenda for the G20 meeting that France will host next May.
It’s great to see that the topic is preoccupying governments. It should be. Of course agriculture prices fluctuate and of course that fluctuation plays a number of very useful purposes in keeping markets on track. Volatility, however, especially unpredictable and extreme volatility, hurts producers, consumers and ultimately undermines investor confidence, starving the sector of much-needed capital.
The problem should be tackled both at the source, by limiting the occasion for extreme volatility to occur, and where it hits home, in poor households especially, by providing safety nets and risk-management tools. It has to be tackled comprehensively, too. Volatility has several distinct components that need to be considered jointly. There are the futures markets and speculative investors, a problem much discussed by IATP, on this blog and elsewhere. There is the question of grain reserves, the issue I came to Rome to talk about and also a hot topic for IATP writing. Then there is trade – do we have the right rules? What can governments do better?
Climate change is affecting the heart of any food system: the weather. We don’t yet know all that it will mean for the future, but for the millions of people coping today with record-setting disasters, from Central America through South Asia with too many stops in between, it is clear that there is a new and particular urgency to addressing volatility quickly and effectively, with as few ideological fights about governments and markets and their respective roles as possible.
This year should see renewed attention from governments on understanding the causes and taking action to at least mitigate volatility. The background paper for the discussion written for the CFS was disappointing: it gave a useful and concise discussion of how climate change was increasing vulnerability to food insecurity but then turned into a very unpersuasive discussion about responses, mostly highlighting the failures of past reserves policies, and not very convincingly. Here’s hoping the next iteration serves governments better. Perhaps by CFS 37 (i.e. in one year’s time), we could hope to see some binding government decisions on the issues. Fingers crossed.