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.
Pierre Jacquet

Price volatility and agricultural development

by Pierre Jacquet,

Chief Economist, French Development Agency (AFD)

The return of the “weather market” season has again placed the issue of agricultural price volatility in the spotlight. In this context, we recommend the article1 written by Pierre Jacquet, Chief Economist at the French Development Agency (AFD), who reminds us that such volatility is an intrinsic nature of agricultural markets. While it might endure––or even increase––in the upcoming years, Pierre Jacquet underscores the importance of implementing mechanisms to stabilize agricultural markets, and ensure suitable visibility and adequate incomes for farmers.

momagri Editorial Board

The recent (2008 and 2010) food price hikes had devastating consequences for millions of people. As a result, food security became a key, if not new, mobilizing factor: Since the 1990s, the rate of undernourished people in developing countries has stopped declining. Today, close to one billion people are suffering from malnutrition (Vindel and Jacques, 2011). […]

In industrialized nations, often-proactive agricultural policies tried to resolve price instability. Government policies helped stabilize prices or farmers’ revenues by giving them the required visibility. And since the mid-19th century, agricultural markets have been developing financial instruments that cover price risks. Following the recent serious crises, the French Presidency of the G20 has set agricultural price volatility and food security as one of its top priorities.

What do we know about price volatility?

Agricultural price volatility is high. Supply and demand for agricultural goods have a very little short-term elasticity, since they vary little when prices change. Any modification in produced or demanded quantities will thus lead to a significant price variation, and consequently, only a strong price rise will permit, for instance, adjusting demand to lower production. In addition, supply is slow to react––when prices rise, farmers plan on increasing yields, but such production will be marketed during the following crop.

During the past twenty-five years, food prices measured in real terms––as compared to prices of manufactured goods––experienced an unprecedented hike. Price volatility––still positively correlated to its level (Sarris, 2009)––especially increased since 2006. In addition to fundamental causes––demographic and economic growth, changes in food diets, climate hazards, higher energy prices competition from biofuel crops and very low food reserves––speculative behaviors in agricultural markets might have intensified volatility due to a spreading sense of panic. However, holding speculation as the sole offender seems too unconvincing, since the two types of factors are interacting. Speculation is a signal that draws attention to fundamentals that have been forgotten for too long. […]

In fact, there is much to suggest that this upswing phase of volatility and price level could continue (see FAO forecasts), since it is driven, on the demand side, by demographic pressure and economic growth in developing countries, and on the supply side, by environmental pressures, climate change and energy costs. The ability of supply to meet demand at a given time in a given place remains very uncertain, even while available forecast studies are not showing challenges in meeting global food requirements at an aggregate level.

How must we respond?

Agricultural price volatility is not the sole issue. We are confronted to many other obstacles––inadequate transportation, communication and storage infrastructures, difficulties in accessing financing, scant training programs, crop vulnerability to various diseases, and deficient access to water supplies among others. Hence, an integrated approach centered on agricultural development and food security must be designed.

That is the reason why the French presidency of the 2011 G20 Summit pressed for the support to be provided for coherent agricultural policies that clearly pursue the goal of food security and the need to include an analysis and management component regarding all risks in these policies. In September 2011, the New Partnership for Africa’s Development (NEPAD) corroborated this approach by officially requesting the G20 to assist its member states in supplementing the development of agricultural policies, in the framework of the Comprehensive Africa Agriculture Development Program (CAADP), with a risk analysis and management component.

It is time to rehabilitate the concept of proactive agricultural policies, because agricultural development cannot be achieved spontaneously without them. The example of industrialized countries attests to the importance of such policies that combined various intervention mechanisms––use of regulatory reserves or tax and trade measures, transfer or compensation mechanisms to provide relief to people or nations in case of crisis. The European Union has implemented regulatory tools in the framework of the Lomé Convention (the Stabex and the Sysmin), and the IMF provides emergency financing systems. In developing countries, these policies must give farmers a visibility on incomes that act as incentives to boost production, as well as well as include social safety nets to protect consumers and supply food to the most vulnerable people.

1 We are publishing excerpts of the article. The complete text is available from :

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Paris, 24 June 2019