Second HLPE Consultation on Price Volatility
The thirty-sixth session of Committee on World Food Security, held in Rome in October 2010, asked to the newly created High Level Panel of Experts to undertake a study, to be presented at the 37th session of the CFS, on price volatility. The present document is the first version (V0) of the study. It has been prepared by a Project Team: Benoit Daviron (Team leader, France), Sophia Murphy (Canada), Niama Nango Dembele (Mali) and Shahidur Rashid (Bangladesh).
Since 2006, international food prices have twice risen sharply. The first rise was broken by the world financial crisis. The second one is still going on. The present report aims to analyze the causes of this renewed international food price volatility and its consequences for developing countries concerning the behavior of their domestic prices and the food security of their vulnerable populations. The report also proposes various policy options at the international and national level.
We propose opening a dialogue over the coming weeks on the following topic and questions:
The report proposes three interpretations of the recent international price rises. The first interpretation defines food price rises as a problem of “agricultural price volatility” - suggesting implicitly that high prices will not last - and as a quasi-natural and permanent problem of agricultural markets. The second interpretation points to the existence of periodic international food crises (1950’s, 1970’s, now) and says they can be explained by the cyclicity of investments in agriculture. Finally, the third interpretation sees in the current price increases the early signal of coming and lasting scarcities on agricultural markets.
- Do these three interpretations cover the whole range of possible causes? Is the distinction between the three interpretations useful when considering food security?
The actual consequences of price volatility on vulnerable populations’ food security are poorly known.
- What are the original sources that could be used to get a better and quicker assessment of the actual situation of vulnerable populations’ food security in relation to price volatility? What kind of policies or institutional frameworks can be put in place to improve the existing knowledge?
For almost two decades, access to imported food with a stable price - in many places much more stable than prices for local goods - played a decisive role for the food security of the poor urban population in food deficit developing countries. With the increased international price volatility, urban populations lost this source of food security.
- What should the policy instruments look like to protect the vulnerable urban population and to ensure their food security?
The successive price rises have deeply eroded the confidence in international food trade as a major resource for vulnerable populations and national food security.
- What should be the necessary steps and policy measures to be adopted to restore confidence in international food trade? How might the role given to international trade in food security be reconsidered? How might food security issues be included in world trade negotiations?
Many instruments have been used and can be used to manage price volatility and its consequences on food security. However the usefulness of a given instrument, or set of instruments, depends on the specificities of each country (household consumption basket, importance of imports in national food supply, institutional capacity…). Clearly, a national food security strategy needs to be country specific. What would be the best way to elaborate such country specific strategies? Supporting the preparation of a Comprehensive Food Security Strategy Support Program (CFSSSP)—in addition Poverty Reduction Strategy Support Program (PRSP)—is proposed in the report in order to capture country specific heterogeneity with respect to consumption patterns, trade profile, and institutional capacity to design and implement food security programs.
- What could be the other strategies or country experiences that should be considered for the elaboration of national food security strategy?
On the basis of this consultation the Project Team will finalize a new version (V1) of the report for end of May 2011. This version (V1) will be will submitted to external expert review. An edited version (V2) will then be finalized for June 30. According to the provisions of the Rules and Procedures for the work of the HLPE (article 32), prior to their publication, the final report will be approved by the HLPE Steering Committee. This is scheduled to take place in July 2011 at the 3rd meeting of the HLPE Steering Committee.
We thank in advance all the contributors for being kind enough to spend some of their time in reading and commenting on the report. Supplementary information and references are very welcomed. We look forward for a rich and fruitful consultation.
Benoit Daviron (Team Leader, France)
Sophia Murphy (Canada)
Niama Nango Dembele (Mali)
Shahidur Rashid (Bangladesh)