The spikes in global food prices in 2007-8 served as a wake-up call to the global community on the inadequacies of our global food system.  Commodity prices doubled, the estimated number of hungry people topped one billion, and food riots spread through the developing world. A second price spike in 2010-11, which drove the global food import bill for 2011 to an estimated $1.3 trillion, showed that while global leaders may now be alert to the problems, our agricultural systems remain deeply flawed.

Various inter-governmental institutions responded with alacrity to the food price alarms. But the most powerful governments remain resistant to reform. In the final two months of last year alone, the G20, the WTO, and the Durban Climate Summit all turned big opportunities for action into small communiqués of little import.

In our new report, “Resolving the Food Crisis: Assessing Global Policy Reforms Since 2007,” we find that the recent crisis has been a catalyst for important policy reforms, but governments have yet to address its underlying causes. By avoiding deeper structural reforms, the countries that dominate international agricultural markets leave the world at risk of another devastating food crisis.

The report, released today by Tufts University’s Global Development and Environment Institute and the Institute for Agriculture and Trade Policy, is based on a comprehensive assessment of the policies and actions taken since 2007 by four international groups of actors: the UN, the G20, the World Bank and international donors.

There is a lot to applaud. The price crisis helped reverse a long-running decline in donor support for developing country agriculture. Much of the renewed support acknowledges the important role governments play in redressing the market failures that plague agriculture. Many developing country governments began to rethink the prevailing orthodoxy that they could import rather than invest in growing their own food. Many now emphasize domestic food production and the central role of small-scale farmers and women. We also saw encouraging attention to environmental issues, including climate change, in local and national plans.

But these reforms fall well short of what is needed to meet the world’s current and future food needs in a sustainable way. New international funding is welcome, but only $6.1 billion of the G8’s pledged $22 billion over three years represents new funding. Those pledges may not materialize and are anyway well short of what is needed. They also focus too narrowly on increasing production. This just encourages an expansion in industrial agriculture based on external inputs and ever-more expensive oil.

As the UN Special Rapporteur on the Right to Food said when accepting his second 3-year mandate in 2011, “Too much attention has been paid to addressing the mismatch between supply and demand on the international markets – as if global hunger were the result of physical scarcity at the aggregate level – while comparatively too little attention has been paid both to the imbalances of power in the food systems and to the failure to support the ability of small- scale farmers to feed themselves, their families, and their communities.”

A structural shift in global markets is underway, caused by the deepening integration of agricultural, energy, and financial markets in a resource-constrained world made more vulnerable by climate change. Powerful multinational firms dominate these markets, and they slow, divert, or halt needed policy changes. This leaves international institutions promoting market-friendly reforms but resistant to imposing the regulations required to ensure well-functioning food and agricultural markets.

A paradigm shift in policies is needed as well. Governments need to discourage industrial biofuels expansion, regulate financial speculation, limit irresponsible land investments, encourage the use of buffer stocks to moderate price swings, reduce fossil fuel dependence, promote agro-ecological practices, and reform global trade rules.

Unfortunately, the institutions reviewed have shown little appetite for decisive action. The world’s most economically powerful nations asserted leadership on food security at the G20, then backed away from reform. This has had a chilling effect on reform efforts elsewhere in the international system, most notably at the UN. (See earlier posts on this here.)

Three areas in particular demand decisive action. First, biofuels expansion must be slowed. It is widely recognized as one of the key factors behind rising agricultural commodity prices, driven by government incentives in rich countries. Second, the high levels of price volatility must be addressed. Financial regulations must limit speculation, well beyond the weak measures already enacted. Firewalls need to be put back in place between traders’ risk hedging activities and speculative investment. Food reserves are also needed to cushion price swings. Third, land grabs by resource-constrained nations and speculative investors must be stopped. Such investments compromise the long-term food-producing potential of developing countries and violate the rights of those now on the land.

Fortunately, many developing countries are making changes. New agricultural development programs in Africa focus on small-scale farmers and women using low-input techniques and local resources while building climate adaptation. Bangladesh and other countries used food reserves to reduce the impact of the food price spikes, and food reserves are again on the agenda. As the African Union said in its rebuke to the G20’s June Agricultural Action Plan, “we must rely on our own production to meet our food needs. In fact, importation is not Africa’s goal.”

Read the Executive Summary, the full report, or watch a Real News Network interview with the authors.

Sophia Murphy is a senior advisor at the Institute for Agriculture and Trade Policy and a regular contributor to the Triple Crisis Blog (see previous posts here, here and here)

The WTO ministerial meeting in Geneva last week failed to take any decisions on the question of food security. Indeed, we knew this would be the outcome even before the meeting began. As the ICTSD reported, two proposals on food security – both calling for exemptions from export restrictions for the world’s least developed and net food importing developing countries and for humanitarian food purchases by the World Food Programme – did not gain sufficient support at the WTO General Council meeting in late November to make the Ministerial agenda.

The fact that WTO members could not even support discussion of these specific measures does not bode well for the adoption of a broader and more comprehensive food security agenda at the WTO.  The disagreements over rules on export restrictions have in fact served as a distraction from the broader food security issues that the WTO is already supposed to be working on.

The original Doha Agenda included negotiations on sweeping reforms to the 1994 Agreement on Agriculture, in particular to give special and differential treatment to developing countries, with a view to promoting food security. This was clearly spelled out in the agricultural work program of the Doha Declaration back in 2001 when the trade round was launched. It is worth quoting here to remind us how central it was to the original aims of the Round:

“We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development.”

In the decade since the Doha Round was launched we have seen major upheavals on world food markets, with soaring and highly volatile food prices that have been especially hard on the world’s poorest countries, most of which are highly dependent on food imports. As the FAO noted in its most recent Food Outlook, higher food prices in 2010-2011 increased the food import bill of the world’s least developed countries by over one third from the previous year.

In this context, advocates of trade liberalization have been quick to blame export restrictions as a principal cause of food price spikes and rising hunger. Such restrictions have undoubtedly exacerbated the situation in the short run. But the causes of rising food insecurity run much deeper and have longer term causes that themselves are not unrelated to WTO rules on agricultural trade – the very rules that the Doha Round was supposed to correct.

The developing countries that are dependent on food imports today were net agricultural exporters in the 1960s. Somewhere around the mid-1980s the situation reversed itself and today they rely on trade for around one quarter of their food consumption. What was the cause of this reversal in the agricultural trade balance? Declining agricultural investment was part of it – not just a decline in domestic investment in developing countries but also a dramatic drop international agricultural assistance. Why did this investment drop? In large part because cheap food was available on world markets, thanks to high subsidies in the rich industrialized countries.

This pattern was reinforced by the 1994 Agreement on Agriculture under the Uruguay Round which enabled the rich countries to keep their high subsidies while further prying open markets in poor countries that had already been forced to liberalize their agricultural trade under World Bank-sponsored programs of structural adjustment in the 1980s. As the UN Special Rapporteur on the Right to Food, Olivier De Schutter said in a press statement during the recent WTO Ministerial: “These countries are caught in a vicious cycle. The more they are told to rely on trade, the less they invest in domestic agriculture. And the less they support their own farmers, the more they rely on trade.”

What is really needed is a serious discussion in the WTO on how to reduce the dependence on food imports and rebuild resilient agricultural sectors in the world’s poorest countries. The early years of the Doha Round in fact had serious negotiations on this question. In seeking to protect themselves from surges of cheap imports that harmed the livelihoods of their domestic farmers, developing countries have been calling for robust safeguard mechanisms to be incorporated into the Doha Agreement . They have also been pressing the industrialized countries to reduce their farm subsidies. But the major agricultural exporting countries – the US, Canada and Australia, have fought hard against a strong safeguard mechanism for developing countries, and the subsidy cuts agreed thus far have been only minimal. In fact, this foot dragging on agriculture is a major reason why the negotiations have been stalled since 2008.

Addressing volatility in food prices is certainly important, and adopting specific exemptions from export restrictions is perhaps one way to alleviate the effects of price spikes on the world’s poorest people in the short term. But such measures – even if the WTO members could agree on them – should not distract us from the bigger picture. We must remember that the root causes of food insecurity are themselves not unrelated to the existing highly uneven WTO rules on agricultural trade, and that the original aim of the Doha Round was to level the agricultural playing field. This original WTO food security agenda should be brought back to the forefront of the discussions.

Agricultural Trade Balance of the Least Developed Countries, 1961-2006

Graphic reproduced from Jennifer Clapp, Food (Polity Press, 2012).

See also Kevin P. Gallagher’s recent work on the future of the WTO in an essay for International Centre for Trade and Sustainable Development, “The Challenging Opportunities for the Multilateral Trade Regime.”

ROME, OCTOBER 2011 – Multilateralism is in crisis. It is perhaps most evident in the painful and truly frightening failure of governments to come to grips with the implications of climate change. But it was also evident on a much less well-publicized stage in mid-October in Rome, where governments were gathered at the U.N. Committee on Food Security (CFS) to discuss food price volatility…

Read the full commentary.

At the meetings of the UN Committee on World Food Security (CFS) in Rome two weeks ago, disappointment was in the air. Expectations that the body would be able to agree to anything near what is needed to effectively address food price volatility had been seriously deflated, especially among civil society groups that were participating. What was the source of the trouble for the CFS? In a nutshell, it was the G20.

Earlier this year when France took on the chair of G20 and President Sarkozy announced his intention to use the forum to address food price volatility, there was initial excitement. Sarkozy promised to rein in excessive speculation on commodity futures markets that was seen to be contributing to price volatility and resulting food insecurity in the world’s poorest countries. There was also hope that the G20 would do away with market-distorting biofuel policies that also have contributed the volatility in food prices. There was even hope that the G20 might support the idea of reserves to manage food stocks and smooth prices.

With its member countries being host to  the world’s major commodity exchanges, the source of most of the world’s major biofuel production, and having experience with holding grain stocks for managing domestic food prices, the idea of the G20 taking on these matters made some sense.

Action on these fronts by the world’s 20 leading economies could have given an important boost to the global initiatives being undertaken under the newly reformed CFS. The CFS – long captured by agricultural ministries, and nearly destined for the history books due to its lack of relevance – underwent substantial reform in 2009. The newly refurbished CFS focuses its work more explicitly on global cooperation required to eradicate hunger. It also now incorporates a broader range of nongovernmental stakeholders as participants, including civil society and the private sector, and it established a High Level Panel of Experts from which to draw the best of current technical advice. These reforms were explicitly aimed to make the CFS the foremost international forum for coordinating efforts to address world food security issues.

It seemed that there was a potential for synergy: that together the G20 focus on food price volatility and the newly reformed CFS with its focus on hunger eradication were going to result, finally, in meaningful global structural economic reform that would smooth food price fluctuations and promote global food security. Indeed, the CFS had commissioned, among others, a report on food price volatility from its High Level Panel of Experts.

But now, on the eve of the Cannes G20 summit, the level of excitement about addressing food price volatility has faded. What happened? In less than 9 months, the G20’s efforts were significantly scaled back from Sarkozy’s initial intentions. In short, the forum’s lack of ability to support any significant initiative that directly addresses the root causes of food price volatility has hobbled the ability of the CFS to make any meaningful recommendations itself on the topic.

In what ways has the G20 failed to deliver? To start, it turned the matter of food price volatility over to the G20 agriculture ministers, who subsequently pushed the question of addressing commodity price speculation onto their finance ministers. The finance ministers in turn ignored food security concerns, other than a brief mention that farmers need to use more hedging tools as a risk management strategy.

The agriculture ministers also completely failed to take up biofuel policies. They also made clear that they did not support the idea of reserves to manage price volatility. Reserves, they stressed, should only be used for emergency purposes, and only on a pilot basis to gather information on how they might work.

Instead of tackling the root causes of price volatility, or even a key mechanism that could potentially help to address it, the G20 agriculture ministers rolled out a new initiative, the Agricultural Market Information System (AMIS). As a colleague and I noted earlier when it was announced, the AMIS is a weak tool at best. But it was much easier politically to gather support for a new information system compared to the structural economic changes required to tackle the root causes of food price volatility.

This is likely to be the extent of the G20’s efforts on food price volatility unveiled in Cannes, unless it is able to pull a rabbit out of the hat by the end of the week. The expectation of only weak efforts by this forum meant that the G20 governments attending the CFS in Rome two weeks ago were unable to agree to anything that might go beyond the G20 agenda. Other governments and civil society groups participating in the CFS were largely pushed into accepting this as the best they could get. The final wording of the CFS Round Table on Food Price Volatility reads almost as if it were cribbed from the G20 agriculture ministers’ declaration from last June, rather than taking the advice from the report of its own High Level Panel of Experts.

The G20’s uptake of the issue of food price volatility, while potentially path-breaking, ended up as a large disappointment. The G20 governments in effect foisted their own preferences onto the CFS – the UN body officially charged with coordinating efforts to promote global food security. This is a shame because G20 could have made a real difference by reforming financial policies in a way that scaled back excessive speculation, by ending biofuel subsidies, and by supporting reserves policies. The G20 blew its chance, and in the process, seriously disarmed the efforts of the CFS to tackle food price volatility.

As is customary now, the days of the business summit – the B20 – overlap with the Leaders’ Summit.  In Cannes, the B20 is on November 2-3; the G20 is on November 3-4.   At these Summits, the Presidents of the business confederations of the G20 countries, as well as 120 CEOs and Chairmen from global companies are delivering messages on 12 themes to the G20.

Many of these Ultra-High Net Worth Individuals (HNWIs) live in a rarified world according to the World Wealth Report 2011. A world far from the “99%” of the population represented by the “Occupy” protests or the civil society mobilizations in Nice on 2-3 November.

The G20 Advisory Group of the International Chamber of Commerce (ICC) is already working closely with its counterparts on the June 18-19 G20 Summit in Los Cabos, Mexico.  That Summit will focus on seven themes: financial regulation and supervision; IFI, especially IMF, reform; the International Monetary System; financial inclusion; commodity price volatility and food security; green growth; and challenges for economic growth.

But whether it is the French or the Mexican G20 Summit, everyone is asking the same question: can the G20 deliver?  The G20 motto seems to be “No We Cannes’t”.  By listening to its own ideologues and the whispers of business, the G20 is sending more and more proposals to the graveyard, such as:

1.  Macroeconomic Policy: A Middle Ground? The G20 pivoted prematurely from a position of coordinated stimulus in 2008-09 to synchronized fiscal consolidation in 2010-11.  Now, given the dire straits of the global economy, the G20 needs to find some middle ground to restart growth and create jobs, while stepping up the pace of financial regulation.  Yet, business whispers “no, you can’t” to the G20.  (See statements to the Cannes Summit by the Global Unions and a coalition urging that human rights norms and principles guide decision-making on financial regulation and climate change.)

2.  Sustainable development? The G20’s High Level Panel (HLP) on Infrastructure seeks approval by the G20 Leaders for the launch of a huge, regional, public-private partnerships (PPPs) initiative in infrastructure, including a new G20 Infrastructure Facility and eleven flagship projects.  In selecting these projects, the HLP may have been asked to consider sustainability factors, such as their carbon footprint or the rights, priorities and consent of affected populations.   If so, their answer was “No, we can’t.”   (See: “Beyond the Public Eye” and position of International Working Group on Trade-Finance Linkages on G20 Development Agenda)

3.  Financial Transactions Tax (FTT). Bill Gates is expected to present his report to G20 Leaders on new and innovative sources of finance, which supports one version of the FTT.  However, since the October communiqué of the G20 finance ministers and central bankers makes no mention of the proposal, consideration of it at the Summit level will be postponed.  (See Kavaljit Singh’s Why We Need a Financial Transaction Tax: A Proposal for the G20.)

4.  Biofuels and Food sovereignty? The G20 Finance Ministers commissioned research on biofuels from ten international institutions, which concluded that that the diversion of food crops for use as fuel represents a permanent re-structuring of the food economy, which will exert continuing pressure on food prices in ways that will adversely affect vulnerable consumers. (Price Volatility in Food and Agricultural Markets: Policy Responses, 2011).  The paper called upon the G20 to eliminate government mandates and subsidies that have spurred the production and consumption of biofuels.  But with business whispering in their ears, the G20 Agriculture and Finance Ministers, said “No, we can’t.”

5. Anticorruption? The G20’s Anti-Corruption Progress Report will be published at the Cannes Summit.   The G20 points to the new laws in Russia, China, India and Indonesia criminalising foreign bribery as one of their successes.  But, for the first time, Transparency International’s annual Progress Report on the enforcement of the OECD Convention Against Bribery of Foreign Public Officials indicated no progress in enforcement made by signatories to the Convention in comparison to 2010.

Progress is being made on some fronts (e.g., transparency of extractive industries active), but on the whole, in taking business as its exclusive partner, the G20 is narrowing the policy agenda in ways that do damage to the public interest.  As citizen pressure grows, the G20 will feel pressure to become transparent, consultative and accountable in relation to member and non-member countries as well as to legislatures and citizens.   However, until that happens, business and the G20 will have the last word, “No, we can’t.”

Nancy Alexander is the Director of the Economic Governance Program at the Heinrich Boell Foundation-No. America.

As the G20 takes its November meetings into the belly of the eurozone crisis, its food security agenda drifts toward irrelevance. Or worse. Early promises to address commodity speculation and market volatility have given way to tepid recommendations from G20 agricultural ministers in June and last month’s underwhelming communiqué from its Washington meeting on development, with its one snappy paragraph on food security issues. Now that finance ministers on their gilded steeds have turned and fled from the dragons of commodity speculation, the G20 is unlikely to slay any of the monsters threatening global food security – biofuels expansion, land grabs, speculation, price volatility, low public investment.

Fortunately, new research keeps coming, and it should inform the debate. The latest is from a group of researchers at New England Complex Systems Institute (NECSI). As their name would indicate, these are modelers, and their paper, “The Food Crises: A quantitative model of food prices including speculators and ethanol conversion,” offers evidence that the underlying cause of rising food prices over the last decade is primarily the US corn ethanol program, while the cause of the two recent price spikes is speculation.

The model results pretty much speak for themselves. The authors – Lagi, Bar-Yam, Bertrand, and Bar-Yam – sought a model that could explain recent food price movements, and they found one. In the process, they disprove notions that rising prices were caused by weather, rising demand in China and India, and other fundamentals of supply and demand. Minor effects, says their modeling, compared to conversion of US corn to ethanol, which explains the vast majority of food price increases (not just corn) due to fundamentals. They then add to this relatively smooth upward pressure on prices their model of commodity market speculation based on observed trends, herd investing, lags in market corrections, and transmission from futures to spot markets. Notably, they fit their model not to futures price movements but to food prices themselves. Here is their summary graph and explanation:

FIG. 1: Food prices and model simulations – The FAO Food Price Index (blue solid line) [1], the ethanol supply and demand model (blue dashed line), where dominant supply shocks are due to the conversion of corn to ethanol so that price changes are proportional to ethanol production (see Appendix C) and the results of the speculator and ethanol model (red dotted line), that adds speculator trend following and switching among investment markets, including commodities,equities and bonds (see Appendices D and E).

The authors explain the influence of volatile futures markets on spot prices by taking the novel step of talking to granaries about their price-setting practices. According to the authors, traders report setting spot prices using futures prices as references. Ghosh, Heintz and Pollin, in a new paper, explain these connections in more detail: “If the expectation is that prices will increase in the future, suppliers will only be willing to sell on the spot market at a higher price than they would in the absence of such expectations. This is because traders in the physical commodity could always hold onto their stocks and sell them at some point in the future.”

In any case, the NECSI model of speculative behavior fits the actual price data to a remarkable degree. They even explain the more recent run-up in food prices, which, unlike the 2007-8 spike, happened despite a rise in inventories generated by supply responses to the earlier spike. Their explanation: speculation, which kept prices above equilibrium and prevented the poor from buying up those inventories.

Their conclusions are quite clear: “Both causes of price increase, speculative investment and ethanol conversion, are promoted by recent regulatory changes – deregulation of the commodity markets, and policies promoting the conversion of corn to ethanol. Rapid action is needed to reduce the impacts of the price increases on global hunger.”

The underlying model certainly deserves closer scrutiny, but this is no marginal study by fringe researchers with an agenda. It was partly funded by the U.S. Army, which was apparently interested in understanding the causes of food price rises and their relationship to popular unrest in the Middle East and North Africa. The authors list their reviewers: Peter Timmer, Jeffrey Fuhrer, Richard Cooper, and Thomas Schelling.

Hopefully, the G20 is still listening. So too the U.N.’s High Level Task Force on the Global Food Security Crisis, which commissioned its own expert study (see posts here and here). The danger is that the U.N. will allow the G20 to set its agenda, in effect reducing the range of issues and policy responses on the table.

The mounting evidence implicates two key drivers of high prices and volatility, biofuels expansion and speculation.  A new study from IFPRI confirms this, as does UNCTAD’s Trade and Development Report 2011. As the NECSI researchers point out, both biofuels and speculation are influenced directly by regulations. That’s good news, because it’s harder to address some of the other drivers, such as the weather and the move to meat-based diets in emerging economies. By comparison, these are simple (if complex politically) and the U.S. government could go a long way to solving them unilaterally: end ethanol incentives and implement strong Dodd-Frank-mandated regulations on commodity speculation. Throw in a Financial Transactions Tax, which still has some supporters in the G20 and which new research shows would most impact high-frequency traders, and we could be making important progress on food security.

G20 – Are you listening?

G-20 development ministers meet on Friday in Washington, D.C. One of the items on their agenda is a proposal developed in June for the G-20 agriculture ministers to allow the World Food Program to develop a pilot proposal for an emergency food reserve. The decision was possibly the most important outcome in an otherwise thin summit communiqué: however circumscribed, we know that food price volatility correlates with low stocks, and that providing stocks is a proven way to curb excessive volatility. We also know that in emergencies, in most of the poorest countries, it takes an average of 90 days to bring food into food-deficit areas. 90 days is too long. The costs of working in emergency conditions are also too high, in both resources and human life. There are cheaper, better ways to ensure food is available when it’s needed: a reserve in the food-vulnerable regions is one of them.

The pilot is to be part of the G-20 Action Plan on Food Price Volatility. Preparation of the proposal included extensive consultation with the Economic Community of West African States (ECOWAS), which accepted an invitation to host the pilot project.

Between the last days of June and just last week, an astonishingly short period of time, the WFP coordinated a process among a number of intergovernmental and national agencies; coordinated the drafting of a report, which is both a feasibility study and pilot project proposal; found a willing partner region (ECOWAS); worked with an ad hoc group of interested G-20 governments who provided oversight; and managed some outreach to NGOs with experience in humanitarian emergencies and stocks policies. It is an impressive achievement. Bravo.

The resulting WFP proposal covers all aspects of the creation, operation and governance of the reserve as well as a comparative analysis including other measures to respond to humanitarian needs under conditions of high and volatile food prices. Yet the G-20 governments placed a number of constraints on the design of the pilot, including the requirement that releases from the reserve only be distributed through safety net programs so as to not affect local food prices (required for WTO compliance), that the size of the physical reserve be kept to a bare minimum (no more than a 30-day supply), that any physical reserve be complemented by some form of “virtual reserve” (something of a catch-all category for alternatives to holding physical stocks directly), and that releases would only be triggered when certain criteria were satisfied, related to global market shocks and local or regional food insecurity indicators. The constraints reflect the preoccupation of many governments (not least the U.S. government) that nothing interfere with commerce—only the poorest should be helped (as they are too poor to voice any demand anyway), and with only limited supplies (in case known supplies should dampen prices and thereby discourage production in the long run).

These constraints could jeopardize the whole exercise, but they could still be changed before the summit of G-20 heads of state in November.

Three concerns top the list:

1. The trigger: The proposed indicator that would be used to decide whether to release stocks from the emergency reserve, a measure of international price volatility proposed by IFPRI, is called the NEXQ (Non-parametric Extreme Quantile). While providing the required objective measure, and respecting the G-20 insistence that this stock is only for responding to international market shocks, not domestic shortfalls, the NEXQ requires analysis of the previous 60 days of international prices, resulting in a serious time lag before any food can be released. Furthermore, it is possible that problematic high prices could occur without significant price volatility (e.g., sustained high maize prices related to mandated biofuel demand) preventing effective use of the reserve. As the High-level Panel report on price volatility makes clear, it is high and volatile prices that are the issue for many countries, not volatility alone. An alternative indicator, such as global stock-to-use ratio, may offer a more responsive yet still objective indicator of whether an international market shock has occurred.
2. The size of the physical reserve: The proposed reserve is in danger of being too small to be effective. In an attempt to keep the physical reserve modest, the 30-day maximum size requirement stipulated for the reserve is calculated on the basis of historical consumption that includes periods of reduced consumption during the recent food crises. If strictly non-crisis periods were used to determine the nominal requirements, the minimum physical reserve size would be substantially largely than the proposed 67,000 metric tons. Furthermore, the difficulties of targeting people made newly vulnerable by a sudden price rise will likely require additional quantities of grain to account for inclusion errors.
3. The virtual reserve options: The preferred “virtual reserve” options rely on drawing from either national food stocks or stocks held by local or regional grain traders. The difficulty of relying on these reserves is that during a period of high and volatile food prices, both of these types of stocks will be under intense pressure to satisfy national needs, or RESOGEST, a regional network of national food stocks that coordinates emergency contributions to countries in the network that face food shortfalls. Moreover, commercial traders will be keen to realize the profits that higher market prices offer and perhaps less willing to be drawn into supplying the reserve. The proponents acknowledge this risk but do not provide a satisfactory alternative.

If the G-20 really wants an emergency reserve to work, it will be important for development ministers to push for a pilot project that dares a little more than the current proposal. It is only a pilot after all: a relatively low-risk opportunity for learning. Nothing ventured, nothing gained; the commercial market has already proved itself inadequate. Whatever the explanation for the failings, it is clear that much of the demand for food in poorer countries has a hard time making itself heard in the international marketplace. If the G-20 wants markets to dominate the exchange of food, safety nets are essential, as G-20 ministers know. Here is a chance to work with something more effective and less expensive that the existing system of humanitarian assistance. Let’s hope development ministers are willing not just to adopt the proposal coming their way (that would be a start), but to strengthen it, too. It is an opportunity to send a strong signal to the G-20 heads of state, who will meet in early November, that reserves are a practical tool to counter market failures that jeopardize people’s lives and livelihoods. It is great to have a proposal on the table, but reserves deserve a better hearing than the G-20 agriculture ministers’ mandate allows. Let’s hope other ministries can take the idea to a higher level.

This post was also featured on the IATP’s Think Forward Blog.

Sophia Murphy is a senior advisor at the Institute for Agriculture and Trade Policy, IATP works locally and globally at the intersection of policy and practice to ensure fair and sustainable food, farm and trade systems.