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.

Frédéric Courleux
Personal account

What debates on agricultural policy have been revived by the agricultural crisis?

Frédéric Courleux,
Economist and Head of Economic Evaluation and Analysis at the Centre for Economic Study and Forecasting (CEP)

While the food crisis of 2007/2008 returned agricultural issues to the centre of international debate, the volatility on agricultural prices and the financialisation of markets contributed to renewing the analysis of food security. In a context of pending and future reforms of the Farm Bill and the Common Agricultural Policy (CAP), we recommend reading a discussion recently conducted by the Center for Economic Study and Forecasting and the Ministry of Agriculture1. In the extracts we have chosen, Stéphane Le Moing, a senior official of the Ministry of Agriculture, Jean-Marc Boussard, former research director of INRA, and Jean-Christophe Bureau, a professor at AgroParisTech, discuss the food crisis, the volatility of agricultural prices, agricultural policy reforms since the 1980s and the restructuring of global agricultural governance.

momagri Editorial board

Frédéric Courleux : For many observers, the current crisis also stems from a discourse for self-regulating markets. Because of the gradual deterioration of stocks before the crisis when prices were low and in view of the irrational price spikes that are largely removed from the fundamentals of supply and demand, does the informational efficient market hypothesis need to be carefully reconsidered?

Stéphane Le Moing (Head of International Relations, Senior Management for Agricultural Policy, Agribusiness and Territories Department of the Ministry of Agriculture) : The crisis should be an occasion for understanding the characteristics of agricultural markets, which economists have understood for a long time, particularly those of relative inelasticity of supply and demand. The crisis should also enable us to recognize that market efficiency, albeit very important, is not an inherent market quality, it really depends on the concrete functioning of markets. It is therefore market governance methods that should be discussed, and in reality, the question of market versus regulation is a complex issue.

Jean-Marc Boussard (Economist, former Director of Research at INRA) : An efficient market is a market where the price is equal to the cost of long-term production. With agriculture this is never the case. When an agricultural product is purchased it is either too cheap or too expensive. This means that the market does not work. And if the market does not work, economists unanimously agree on the need to intervene. [...]

Since the early 1980s, agricultural policy reforms aim to not affect price signals but to simply limit the effects of the structural instability of agricultural markets. Does the cost of agricultural market instability for the whole economy and the systemic character of price risks, challenge this strategy? Is prevention more justifiable than cure? [...]

Jean-Christophe Bureau (Economist, research professor at AgroParisTech) : It is understandable that a state seeks to stabilize domestic prices and the use of flexible tariffs is a quite sensible measure. But is it possible to stabilize domestic markets without significantly destabilizing global markets? While some countries protect themselves by stabilizing their domestic markets with subsidies or export taxes, they transfer instability to a narrow global market, which is more sensitive to the changes in supply and demand.

Jean-Marc Boussard : This is where we perhaps have a theoretical conflict. The bottom line is in understanding the origins of price fluctuations. There are two theories on this subject, not three. One theory sees the origin of price changes in "sunspots." They are weather-related or related to similar factors, subject to the law of large numbers and unpredictable. If this theory is true, then indeed all liberal theories are perfectly justified. Lamy's thesis relies on open borders to regulate prices, droughts de not simultaneously occur in Australia, Argentina and Europe. However, if the fluctuations correspond to a cobweb phenomena and are due to errors of anticipation, the imperfection of markets and so on. Then the opening of markets synchronizes fluctuations but does not affect their magnitude. On the contrary, policies on price regulation, even within countries, ensure minimum production margins, and consequently, guarantee a certain depreciation in fluctuations on world prices. The narrow market theory cannot therefore be verified, and there are models that clearly show that in this case, regulating the "big" market helps to stabilize the "little” market. [...]

How else does the crisis provide other elements in favour of agricultural policies?

Stéphane Le Moing : Events on financial markets are likely sources of inspiration for our position on agricultural markets, to the extent where balance between real economy and financial economy is put to the question. The financial markets are necessary to finance the real economy, to provide price signals and to provide risk management instruments. At the same time, their development may ultimately affect the real economy. Although it is difficult to implement and we should proceed with caution, the idea of regulating financial markets has emerged. In agriculture, the problem is even more important, because it touches, as previously mentioned, the fundamental question of food. [...]

With its report on world development in 2008, the World Bank began revising the strategic role of agriculture on development shortly before the outbreak of the crisis. Can it be thought that the food crisis marks the final failure of the Washington consensus?

Stéphane Le Moing : The crisis did have a beneficial role by imposing a much more subtle and realistic approach to the different elements. Openings are beginning to appear concerning the need to reinvest in agriculture, with regards restrictive fiscal policies. Trade policies are also more subtly approached. The crisis has highlighted the danger of the policies previously advocated in favour of export crops that lead to dependence on external markets, which could threaten basic food supplies. However, trade must retain a key role, even if only because from a global perspective, there are zones that are structurally surplus zones and others that are in deficit over the medium to long term. But it is an illusion to think that trade is the only solution to the problems of agricultural policies. [...]

Can we envisage a future multilateral agreement that would truly organize global governance for food security?

Stéphane Le Moing : The crisis has highlighted the need for a common approach on an international level, starting by sharing expertise on the food sector using the IPCC model. The second dimension of this common approach should be to recognise the strategic nature of agricultural policies. An international debate is needed to attempt to define an area of consensus on policy recommendations for food security, without restricting the standpoint of trade liberalization, as was the case until now. A real place for exchange is required in conjunction with the Doha round negotiations. And even if we remain in political statements, it is essential that food security is part of the debate, which should not be used as a false argument for introducing harmful protectionist policies to developing countries. Food security should be a priority on which to invest and articulate with other dimensions of public policy.

1 http://www.agreste.agriculture.gouv.fr/publications/notes-et-etudes-socio-economiques/article/debat-en-quoi-la-crise-agricole

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Paris, 22 March 2017