ifpri oxfam america policy roundtable -- maximo torero

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

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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

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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


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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


Mexico


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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


Mexico


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What was recommended in the G20 of France and reported in the G20-

Mexico


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


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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

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China South Asia, minus India

Latin America & Caribbean India


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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


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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


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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


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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).

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Increase in fertilizeruse

Increase in cropproduction

Increase in ruralincome

13.3

3.31.0

18.8

4.7

1.9

%

Conservative scenario Optimistic scenario


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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

ifpri oxfam america policy roundtable -- maximo torero

Education

parisinitiativesincrease

world crop

agricultural

agricultural

food security

support g20

innovation

comprehensive