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IFPRI Oxfam America Policy Roundtable: Food Security & the G2O -- presentation by Maximo Torero on May 1, 2
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From G20 France to G20 Mexico
Maximo [email protected]
Food Security and the G20, IFPRI1st of May 2012, Washington DC
FAO Food Price Index
Averaged 216 points in March 2012, very similar to February (215) points and nearly 2 percent (5 points) up from December. The rebound represented the first upturn in the FFPI since July 2011 but the index remained 7 percent below its corresponding value last year.
Historical Evolution of Corn Prices
Periods of Excessive Volatility
0
20
40
60
80
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120
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Num
ber
of d
ays
of e
xces
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olat
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YearCorn Soft Wheat Hard Wheat
Note: This figure shows the results of a model of the dynamic evolution of daily returns based on historical data going back to 1954 (known as the Nonparametric Extreme Quantile (NEXQ) Model). This model is then combined with extreme value theory to estimate higher-order quantiles of the return series, allowing for classification of any particular realized return (that is, effective return in the futures market) as extremely high or not. A period of time characterized by extreme price variation (volatility) is a period of time in which we observe a large number of extreme positive returns. An extreme positive return is defined to be a return that exceeds a certain preestablished threshold. This threshold is taken to be a high order (95%) conditional quantile, (i.e. a value of return that is exceeded with low probability: 5 %). One or two such returns do not necessarily indicate a period of excessive volatility. Periods of excessive volatility are identified based a statistical test applied to the number of times the extreme value occurs in a window of consecutive 60 days.
Source: Martins-Filho, Torero, and Yao 2010. See details at http://www.foodsecurityportal.org/soft-wheat-price-volatility-alert-mechanism.
INTERNATIONAL FOOD POLICY RESEARCH
INSTITUTE
Initiative Key objective Progress
Agricultural Market Information System (AMIS):
Has three objectives: 1) to improve the information base and disseminate information in a transparent manner; 2) to develop the capacity to produce detailed commodity market data; and 3) to facilitate policy dialogue and coordination in the event of a serious crisis in commodity markets
AMIS secretariat is established, portal is working and will be officially launched in June. G20 countries + 7 key importers and exporters have to deliver data.
Rapid Response Forum (RRF)
Definition of indicators that could led to an “abnormal international market condition” and the procedures that RRF could adopt to cope with this condition
First meeting in April 2012, in process of defining indicators of “abnormal international market conditions”
Recommendations in the G20 of France and reported in the G20-
Mexico
INTERNATIONAL FOOD POLICY RESEARCH
INSTITUTE
Initiative Key objective Progress
International Research Initiative for Wheat Improvement (IRIWI)
Aims to identify synergies and nurture collaborations via facilitated open communications between research programs for wheat improvement, research and technology development.
Launched in September 2011Global action plan is developed by CGIAR and a business plan
The Global Agriculture GEO-Monitoring Initiative
It aims to strengthen the international community’s capacity to produce and disseminate relevant, timely and accurate forecasts of agricultural production at national, regional and global scales, by enhancing national and agricultural reporting systems.
Launched and a is headed by the Group on Earth Observation which developed a detail work plan
The Tropical Agriculture Platform (TAP)
focuses on enhancing capacity-building and knowledge sharing to improve agricultural production and productivity
Consultation process with stakeholders to define scope and nature of activity
Recommendations in the G20 of France and reported in the G20-
Mexico
INTERNATIONAL FOOD POLICY RESEARCH
INSTITUTE
Initiative Key objective Progress
Food Purchases for Humanitarian Non-commercial Purposes by the World Food Program (WFP).
Removal of food export restrictions or extraordinary taxes for food purchased for non-commercial humanitarian purposes by WFP
Still need to seek resolution from WTO
Regional Emergency Humanitarian Food Reserves
ECOWAS pilot project in process of implementation
ECOWAS task force to develop operational plan. Process is very slow.
Voluntary Guidelines on Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security
Guidelines approved by the CFS
Pending country level implementation of guidelines
Principles for Responsible Agricultural Investment (PRAI)
Pilot Projects of the PRAI by CFS. Launched in Feb. 2012
Pilot project summary report will be in September 2012
Recommendations in the G20 of France and reported in the G20-
Mexico
INTERNATIONAL FOOD POLICY RESEARCH
INSTITUTE
What was recommended in the G20 of France and reported in the G20-
Mexico
Initiative Key objective Progress
Risk management tools
IFC has developed some tools to help developing countries to cope with price volatility for agricultural commodities, such as the Agricultural Price Risk Management (APRM) + Platform on Agricultural Risk Management (PARM)
APRM launched but still needs validation, no clear progress in other tools.
Financial Regulations Principles for the Regulation and Supervision of Commodities Derivatives Markets by the G20 Leader’s in Cannes, the International Organization of Securities Commission (IOSCO) will assess their implementation
Individual countries have started some regulations. Progress report to be presented by IOSCO in November 2012
INTERNATIONAL FOOD POLICY RESEARCH
INSTITUTE
New Recommendations of IO’s to the G20-Mexico
Core goal increase food production and productivity
in a sustainable basis to promote food security and
foster economic growth
High levels of market concentration
Compound Annual Growth Rates in World Crop Yields
Figure 1. Compound annual growth rates in world crop yields (%)
Source: FAOSTAT.
Source: FAOSTAT
• The average global rates of growth in yield of most of the major cereals are declining.
• Since the 1980s, growth in wheat and rice yields fell from 2.5- 3% to around 1%. Maize yields showed growth of slightly less than 2% over the last decade
Trends in food and agricultural public expenditures
Figure 1. Compound annual growth rates in world crop yields (%)
Source: FAOSTAT.
Source: ASTI
• Public R&D expenditures on agriculture in low-and middle income countries are generally lower as a % of Ag. GDP than in OECD countries.
• In East Asia and the Pacific, China accounted for about two-thirds of total public agricultural R&D
• In Sub-Saharan Africa, after a decade of stagnation in the 1990s, investment in agricultural research rose more than 20% between 2001 and 2008 but mainly in few countries
0
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1,000
1,500
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2,500
3,000
3,500
4,000
4,500
1981 1986 1991 1996 2001 2006M
illion
2005
PPP d
ollar
s
Sub-Saharan Africa East Asia & Pacific, minus China
China South Asia, minus India
Latin America & Caribbean India
INTERNATIONAL FOOD POLICY RESEARCH
INSTITUTE
New Recommendations of IO’s to the G20-Mexico
Initiative Key objective
Increase agricultural productivity - Invest in sustainable approached to productivity growth
- Supporting improving agricultural and rural statistics in public and private investment in agricultural productivity
Improving trade policies - Sstrengthen international disciplines on all forms of import and export restrictions, as well as on domestic support schemes that distort production incentives
- Promote greater adherence to the science-based sanitary and phytosanitary measures developed by the FAO/WHO Codex Alimentarius Commission and capacity building
What is happening today
Secondary responses: An illustration with the wheat market: Effects on world prices of trade policy
reactions for selected countries
0% 5% 10% 15% 20% 25%
Exogenous demand increase [initial perturbation]
Effects of increases in export taxes to mitigate the shock on domestic prices
Effects of decrease in import du-ties to mitigate the shock on domestic prices
Interaction effects between import and export restrictions
Policy Effects
“Natural” Shock
Source: Bouet and Laborde, 2009. MIRAGE simulations
INTERNATIONAL FOOD POLICY RESEARCH
INSTITUTE
New Recommendations of IO’s to the G20-Mexico
Initiative Key objective
Promote Public Private partnership for investment in agriculture
- Work with B20 to assess the potential of various public-private partnership models to increase foreign direct investment in developing country agriculture and,
- promote and scale-up appropriate partnership models in developing countries’ agriculture
Improve investments in agricultural innovation systems
- Continue to support G20-Paris initiatives
- Increase policy dialogue on AIS at a high level
- Support the Agricultural Science and Technology Indicators (ASTI) initiative to a) collect and maintain a comprehensive database on expenditures on agricultural innovation; b) develop tools and methods to assess the performance and impact of innovation systems
INTERNATIONAL FOOD POLICY RESEARCH
INSTITUTE
New Recommendations of IO’s to the G20-Mexico
Initiative Key objective
Improving information, access and IPR systems on plant and animal genetic resources
- Support developing countries to establish and enforce IPR systems consistent with international obligations
- Support development and promotion of a global information system on plant and animal genetic resources and making information available through a common portal such as “Genesys”
Improve investments in agricultural innovation systems
- Continue to support G20-Paris initiatives
- Increase policy dialogue on AIS at a high level
- Support the Agricultural Science and Technology Indicators (ASTI) initiative to a) collect and maintain a comprehensive database on expenditures on agricultural innovation; b) develop tools and methods to assess the performance and impact of innovation systems
INTERNATIONAL FOOD POLICY RESEARCH
INSTITUTE
New Recommendations of IO’s to the G20-Mexico
Initiative Key objective
On Water - Recognizing the importance to improve the efficiency of water use in agriculture and to safeguard the quality of water
- Continue dialogue based on the recommendations concerning food security and water made by Ministers in their Declaration at the World Water Forum
Sustainable use of natural resources within the short-term imperatives of ensuring food security
- Review policies that could have perverse incentives for sustainability
- Support design of policies that do a comprehensive analysis of the relationship between food security, food production and natural resources
- Increase monitoring and evaluation of systems of “market-smart” smallholder targeted subsidies
- Analyze mechanisms to increase competition in the fertilizer industry
Distribution of World Fertilizer Production capacity by country
Note: Based on capacity of operative plants in 2008/09.Data: IFDC Worldwide Fertilizer Capacity Listing by Plant.Source: Hernandez, M and Torero, M (2012)
Impact on fertilizer intake, crop production and rural income of a 10% decrease in concentration
Source: Hernandez, M and Torero, M (2012), ), Gruhn et al. (1995) and Bumb et al. (2011).
02468
101214161820
Increase in fertilizeruse
Increase in cropproduction
Increase in ruralincome
13.3
3.31.0
18.8
4.7
1.9
%
Conservative scenario Optimistic scenario
INTERNATIONAL FOOD POLICY RESEARCH
INSTITUTE
New Recommendations of IO’s to the G20-Mexico
Initiative Key objective
On Risk management - Platform for Agricultural risk management
- Global Index Insurance Facility- Weather info for All initiative- Improve historical and current
meteorological information to facilitate development of weather insurance
On Human Capital Development - Support the continued provision of targeted, well-designed and gender-sensitive social protection programs
- Explicit integration of agricultural education and of the sustainable agriculture intensification agenda
- Bridge gender productivity gaps in agriculture (both access to resources and technology)
- Promote the Women Empowerment Index
Final comments
Invest in agricultural research and development to improve world portfolio of exporting countries
Improve information to better prioritize needed investment to increase agriculture productivity in a sustainable basis
Enable environment to the increase of private and public & private investment
We need to increase food production and productivity in a sustainable basis Competition in the input markets is needed
Better information to improve risk coping mechanisms is needed
Thanks