Supply tight but shocks could be muted

After a year of severe droughts in major cereal-supplying countries, crop projections for 2013 bode ill for global stocks of wheat, maize and soybeans, warned the UN Food and Agriculture Organization (FAO). But the harm may be limited by a system established to prevent a repeat of the 2007-2008 food price crisis.

The year-old Agricultural Market Information System (AMIS), a G20 initiative exclusively covering the world's biggest staple grain suppliers and consumers, seems to be working to prevent food price shocks.

Preventing panic

When maize and wheat prices began to climb this year, following news of lower production in the drought-affected US and eastern Europe, many predicted yet another major food crisis. Some expected AMIS to convene the Rapid Response Forum, its main emergency mechanism, to "react to market uncertainty", said Denis Drechsler, AMIS’s project manager. 

Instead, AMIS advised its member countries - all important players in the global supply and demand of major staple cereals - not to convene the meeting. They reasoned that, first, the "market situation did not warrant this reaction and, second… it would have sent the wrong signal concerning the gravity of the situation."

AMIS "helped to prevent panic and to stop the worst drought in decades [in the US] turning into a food price crisis, as has happened in the past," said José Graziano da Silva, Director-General of FAO, in a statement.

Photo: Agricultural Marketing Information System
World supply-demand balances as in November, according to AMIS

"Droughts or floods are not what cause crises; it's lack of governance. In a globalized world, we cannot have food security in only one country or in one region. We need to strengthen the global governance of food security."

More intelligence needed

Following the food price spikes in 2007-2008 and yet again in 2010, experts pointed out that accurate and timely information on the food stocks held by major grain exporters and importers - "food intelligence" - could help prevent sudden and abnormal price hikes that threaten food security. This prompted the establishment of AMIS. 

Experts also highlighted the need to have intelligence on policy decisions likely to be undertaken by major exporters or importers that could impact the global stock of cereals - for example, export or import restrictions. Some countries do not share information on such policies, which many food experts blame for price spikes.

"We are not there yet - we have just set up historical production data and are uploading current food stock data," said Drechsler. "But we are getting there. We will also need to know from countries how much of their staple grain would be diverted to produce biofuel, for instance."