Price and trade volatility in global grain markets: policies for a turbulent future

Abstract

In the past few years, we have experienced a transition from the decades-long period of falling real prices of grains, and food more generally, to a new market environment in which commodity and food prices are, higher, more volatile and more highly influenced by petroleum prices. This market behavior and the conditions surrounding it are likely to continue, and the prospects of returning to the declining prices of the previous decades are less likely. The food and financial crises of 2008 and 2009 led to social problems and unrest in scores of countries, and have added millions of people to the number of hungry and undernourished in the world while reversing progress towards the Millennium Development Goals hunger target. FAO estimated that the economic crisis added far more people to the number of undernourished than did the food crisis of 2008. The economic crisis that hit hardest in 2009 (figure 1) severely depressed economic growth and the purchasing power of consumers; and the recovery from this recession has been very slow in many countries. Since our session takes place in Moldova, I note that Moldova’s economy declined more than some countries and regions but IMF also expects a faster recovery. Now in 2010 and 2011 food and other commodity prices have risen again (figure 2), and as we will see later, many of these could remain high for a longer period than was the case in 2008. The economic shocks and the added impact of another food price surge in 2010 and 2011 are more severe for low-income populations, especially in food-deficit areas, and once again raise serious food security issues.