Agricultural Investment and Virtual Global Food Reserves

July 14, 2008

This past June, world leaders met in Rome to respond to the troubling food crisis which has dragged millions of the world’s most vulnerable into poverty. The Rome Summit called for global action in regard to increased food aid, the elimination of export bans, and extra seed and fertilizer provisions for small farmers. In addition to these short term solutions, leaders also urged their “development partners” to invest in agricultural research for long term food security. An IFPRI policy brief written by Shenggen Fan and Mark Rosegrant concluded that investing in agriculture is key to addressing the current food price crisis. They estimate that spending an additional $14 billion per year could boost African agricultural production by 7.5 percent annually through 2015.   Unfortunately, agreeing and acting upon the Rome Summit recommendations has proved to be difficult.  Almost one month later, the world food crisis was at the top of the agenda at the Group of Eight summit meeting in Japan last week. The cause of rising food prices has long been attributed to rising demand for food and feed, high oil prices, and biofuels. However, an IFPRI policy brief written by Joachim von Braun and Maximo Torero identifies the malfunctioning of world grain markets as an additional driver of the world food crisis.  The brief proposed a “virtual global food community” that could provide emergency reserves and calm markets while avoiding the high storage costs, slow transactions, and risky price increases of traditional reserves. The G8 released a food security statement that mentioned a similar type of plan: “We will explore options on a coordinated approach on stock management, including the pros and cons of building a ‘virtual’ internationally coordinated reserve system for humanitarian purposes.” Although the statement was not a firm commitment to the stockpile approach, it nevertheless urged other countries “with sufficient food stocks to make available a part of their surplus for countries in need, in times of significantly increasing prices and in a way not to distort trade.”