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FAO presentation on 2/2/2011 to the CTA Briefing No21 on Geopolitics of Food: implications for ACP coun

The FAO Assistant Director-General of the Economic and Social Development Department, Mr. Hafez Ghanem, will make a presentation on 2/2/2011 to the CTA Briefing No21 on Geopolitics of Food: implications for ACP countries. His presentation will be on Greater transparency for a better management of agricultural price volatility. Food prices have been fluctuating widely over the last four years, hurting both consumers and producers. In the second half of 2010, the FAO Food Price Index increased, especially after the drought in Russia this summer, and reached 215 in December 2010, surpassing its 2007–2008 crisis peak.

Hafez Ghanem, FAO .

Price Volatility has an impact on the poor consumers. Large, unexpected swings in food prices greatly endanger the food security of the poor in developing countries who spend as much as 70 percent of their incomes on food. As a result of the 2007–2008 food price crises, FAO estimates that about 80 million additional people became undernourished. Excessive volatility also hurts producers. When price uncertainty increases, poor farmers invest less and use fewer inputs, making them more likely to remain in poverty. Food price volatility will be one of the priorities on the G20 Agenda this year.

FAO is considering that different variables could affect the food price volatility: the petroleum prices, the crop yields, the food stock levels, and the exchange rates. If the petroleum price is high, there will be an increase of the transportation costs of agricultural products and fertilizer prices. It can create an increase of request for bio fuels which require food crops as inputs and can therefore change food prices. The food demand is inelastic: small changes in supply can lead to big changes in prices, meaning that even limited crop yield variations can have large effects on food price fluctuations. The food price volatility is inversely related to the level of food stocks: as stocks fall, price volatility rises. Finally, changes in exchange rates, especially of major exporting countries, translate to changes in international food prices. An additional cause of price volatility is the lack of reliable, up-to-date information on crop supply and demand, stocks, and export availability. Speculators may also have an impact on the food price volatility.

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FAO presentation on 2/2/2011 to the CTA Briefing No21 on Geopolitics of Food: implications for ACP coun

The agricultural Economic markets and and will Social publish Development inthe the forthcoming Department months islevels. working a on on price volatility in and Crises in Global Food Markets Price Volatility and (see Policy Brief covering the aspects of price volatility which has an impact on the world food security). Market-friendly and FAO will be extensively approaches developed are needed in to book: limit volatility. Some ofreport them are reported here below Yield-enhancing investments: developing development their hybrids. countries. and infrastructure More investments Agriculture that promote must has irrigation been be neglected as particularly well as for too drought-resilient in long, research particularly and crops in Trade policies: export restrictions Current during trade crises, policies, must be particularly reviewed agricultural to limit the effects subsidies of in food rich price countries volatility. and Improving market transparency: dissemination market and related efforts. financial The efforts transactions. FAO should should focus intensify on information its information about both gathering the real and agricultural Reforming policies for grain-based bio fuels: review such policies, taking their impact on food Countries security with into support account. regimes for bio fuels could Review stock policies: maintained. could also be These envisaged. could Adequate be held emergency at the national food ormade, stocks, regional or strategic Global reserves, emergency must be reserves

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