A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
Agriculture's key figures
Agricultural price volatility,
A specific and dangerous phenomenon for food security
Ever since agricultural markets have existed, agricultural prices have always been volatile.

Under the pressure of an unstable economic environment, the trend is dangerously increasing and threatens food security.

In fact, extreme variations have been recorded during the past few years: agricultural prices can vary by 100% in a year’s time!

Given the scope of the phenomenon, France initiated an Action Plan on Food Price Volatility in 2011, in the framework of the G20 agricultural aspects.

Yet, while the causes of volatility are becoming better understood, expert opinions are still divided regarding the measures to be adopted to fight it…

Goldman Sachs Commodity Index – Agriculture Daily data (1971-2011) 1

Agricultural price volatility can be explained by the unique combination of exogenous and endogenous risks.

Depending on their origin, the risks influencing agricultural production and prices are either exogenous or endogenous. The difference is crucial to develop appropriate regulatory measures.

- Exogenous risks are independent of market players and come from climate hazards or epizootic diseases. These are the most frequently given reasons by experts to justify the root of agricultural price volatility.

- Endogenous risks are triggered by the behaviors of market players, from farmers to speculators. These risks are the major source of agricultural price volatility.
  • First endogenous risk: Farmers’ individual crop rotations or livestock decisions, based on imperfect anticipations. These choices are irreversible during the production cycle.
Even if farmers decide to give more or less attention to their crops, this irreversibility makes it a difficult task to adjust to supply and demand. All the more so since demand is not elastic in comparison to price.
  • Second endogenous risk: Speculators’ behaviors in financial markets that have, since the 2000s, led to intensify imbalances specific to agricultural markets.
In the absence of regulatory stocks, only a one to two percent gap between supply and demand is enough to generate price fluctuations of 50 to 100 percent! Indeed, decisions by governments––such as Russia in the 2010 summer––to discontinue exports to protect their food security, can further inflame agricultural price speculation.

Unregulated liberalization of agricultural trade intensifies volatility

In an environment of agricultural markets driven by the complex behaviors of players (farmers, speculators and governments), the free play of market forces will not be the absolute antidote to price hyper-volatility and food crises. Even worse, it will only exacerbate price volatility.

This is shown by the projections of the momagri model, which includes the exogenous and endogenous risks that are specific to agricultural markets.

Source : FAO, 2011, momagri 2012

For momagri, it is now urgent to implement regulatory policies in physical and financial markets to curb agricultural price volatility, and to prevent its consequences that are devastating for all farmers and consumers worldwide. In fact, volatility can lead to food riots and destroy all agricultural potential in some parts of the world.

1 Standard & Poor’s, Goldman Sachs Commodity Index - Agriculture, série journalière 1971-2011 (2012).
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Paris, 16 June 2019