A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Pierre Pagesse.
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.
Tribune


Financial crisis and food crisis: Are identical ills calling for identical remedies?



By Bastien Gibert,
Associate, Carles & Associés consultancy
Advisor, momagri



The figures are clear and irrevocable: At the start of 2010, over one billion people are suffering from hunger worldwide and one in six Americans are experiencing food insecurity.

Who could have imagined, back in 1990, that the goal of reducing by half the number of people suffering from hunger worldwide would not be reached and, even worse, would increase?

And more, who could have said that the United States––known for its generous support of agriculture and food security for its population, would also find itself in such a situation?

While these figures are astonishing, they nevertheless remain under-estimated by most developed countries, which consider that the specter of hunger no longer concerns them and belongs to the past. This painful error in judgment is brought forth by the current crisis, which again undermines our confidence, as it was the case in 2008 with our pseudo-belief in the ability of markets to self-regulate.

Current facts are as follows:

    - Food insecurity is spreading throughout the world and no region is longer protected;
    - The emergency aid programs implemented by international institutions have a short-term effectiveness and are unable to stem the structural rise of food insecurity;
    - The food assistance programs instigated in the U.S. agricultural policy––€43 billion in 2008––were not successful in curbing the trend. Where would one be if such programs had not been established?
Recent times have certainly been critical. But they also provide a unique opportunity to better understand the mechanisms and transmission channels in operation, since the three major and global crises occurred in less than three years.

While the underlying and triggering factors for each of these three crises are radically different, common symptoms can indeed be found and represent a wealth of findings for the future.

Just like the financial crisis, the food crisis, which jolted poor countries in 2008 and this time threatens the world in 2010, is rooted in market price issues that:
    - - Are no longer corresponding to the notion of “just price”, since agricultural production costs are very often higher than farmers’ selling prices;
    - Are disconnected from the physical basics of supply, demand or cost price, thus enabling a rush of short-term investors and the formation of speculative bubbles, which are also intensified by gradual deregulation and the dismantling of intervention mechanisms;
    - Are hyper-volatile as consequences of the two above-mentioned items.
We are seeing here the same vicious circle than the one that threw the American real-estate market in crisis, and by repercussion, global markets in turmoil. Consequently, a question arises: When is the agricultural and food crisis going to break out?

We are now living in a world-economy where isolated initiatives alone can no longer make a difference. Just as the sole American stimulus plan would have been inadequate to recue the U.S. economy after the financial crisis, the same applies to the agricultural and food crisis. The systemic nature of the crisis we are experiencing compels all nations worldwide to adopt common governance and regulation principles.

Identical ills call for identical measures. The global food insecurity can only be eradicated by getting to the root of the problem: Uncontrolled volatility of agricultural prices in international markets. Consequently, just as the latest G-20 Summit generated the launch of a massive economic recovery plan based on regulatory measures in financial markets, it is imperative that the next G-20 Summit focuses on the agricultural and food crisis.

Three issues are thus demanding top priority:
    - What regulatory principles must be introduced to oversee the erratic fluctuations of agricultural prices?
    - What common governance principles must be adopted to maximize market operations?
    - What evaluation tools must be made available to better assess global insecurity conditions as well as agricultural and food market operations?

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Paris, 21 October 2014