40 Years of Agricultural Trade, Distortions and Policies

Division Director at the Division Director of the Markets, Trade, and Institutions Division

International Food Policy Research Institute

Maximo Torero

Real Price Evolution in US$ 2015

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1960

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USD

per

Met

ric T

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Soybeans (US$/mt) SOYBEANS

Maize (US$/mt) MAIZE

Periods of Excessive Volatility

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 pre-established 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.

2014

Please note Days of Excessive volatility for 2014 are through March 2014

Different problems but same policies

A continuous trend towards internationalization of food markets

1975 1985 1995 2005 2015

18.2%

13.9%12.3%

19.1%

16.1%

Share of produced calories crossing an international border

Globalization and/or Regionalization

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Average distance (km) travelled by imported calories

1995 2000 2005 2010

Cumulative number of preferential trade agreements (PTAs) in force

Note: it includes notified and non-notified PTAs by country group

Evolution by region of the price support through border measure

-60.0%

-50.0%

-40.0%

-30.0%

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-10.0%

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Africa Asia Eastern Europe LAC HIC World

Average Nominal Rates of Assistance (NRA) through Border Measure

1975 1985 1995 2005

… and DOHA?

But mega trade deals are becoming strategic

TPP

USA

TTIP

TISA

VietnamBruneiSingaporeMalaysia

Australia Canada TaiwanJapan Chile Mexico PeruSouth Korea New Zealand Norway

SwitzerlandIceland

IsraelUruguayHong Kong

Costa RicaColombiaPanama

ParaguayTurkey

Austria Bulgaria Belgium France Czech Republic Ireland Denmark

Germany Estonia Portugal Romania Poland Netherlands Lithuania UK

Sweden Luxembourg Slovenia Hungary Slovenia Italy Spain

Greece Finland Malta

CroatiaLativia Cyprus