Cover photo: ©FAO/G.Napolitano

HLPE REPORT

Price volatility and food security A report by The High Level Panel of Experts on Food Security and Nutrition July 2011

Secretariat HLPE c/o FAO Viale delle Terme di Caracalla 00153 Rome, Italy Website: www.fao.org/cfs/cfs-hlpe E-mail: [email protected]

Price volatility and food security A report by The High Level Panel of Experts on Food Security and Nutrition July 2011

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HLPE REPORT

Price volatility and food security A report by The High Level Panel of Experts on Food Security and Nutrition July 2011

Committee on World Food Security High Level Panel of Experts on Food Security and Nutrition Rome, 2011

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HLPE Steering Committee members (July 2011) MS Swaminathan (Chair) Maryam Rahmanian (Vice-Chair) Catherine Bertini Tewolde Berhan Gebre Egziabher Lawrence Haddad Martin S. Kumar Sheryl Lee Hendriks Alain de Janvry Renato Maluf Mona Mehrez Aly Carlos Perez del Castillo Rudy Rabbinge Huajun Tang Igor Tikhonovich Niracha Wongchinda

HLPE Project Team members Benoit Daviron (Team Leader) Niama Nango Dembele Sophia Murphy Shahidur Rashid

This report by the High Level Panel of Experts on Food Security and Nutrition (HLPE) has been approved by the HLPE Steering Committee. The views expressed do not necessarily reflect the official views of the Committee on World Food Security, of its members, participants, or of the Secretariat. This report is made publicly available and its reproduction and dissemination is encouraged. Noncommercial uses will be authorized free of charge, upon request. Reproduction for resale or other commercial purposes, including educational purposes, may incur fees. Applications for permission to reproduce or disseminate this report should be addressed by e-mail to [email protected] with copy to [email protected] Referencing this report: HLPE, 2011. Price volatility and food security. A report by the High Level Panel of Experts on Food Security and Nutrition of the Committee on World Food Security, Rome 2011.

Table of Contents FOREWORD ............................................................................................................................................ 7 SUMMARY AND RECOMMENDATIONS FOR POLICYMAKERS ......................................................... 9 Introduction ............................................................................................................................................ 17 1

Recent price behaviour in international food markets: Three explanations.................................... 19 1.1

Excessive price volatility ........................................................................................................ 22

1.1.1

Food demand becomes less sensitive to price changes as income increases ................. 23

1.1.2

Global food markets: more integrated but easily re-fragmented........................................ 24

1.1.3 Speculative funds in the futures market have dramatically increased, but so has the cost of hedging ...................................................................................................................................... 25 1.2 1.2.1

A decline of world stocks.................................................................................................... 27

1.2.2

A decline of agricultural investment ................................................................................... 29

1.2.3

A decline of public spending on agriculture ....................................................................... 29

1.3

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3

Recurrent food crises ............................................................................................................. 27

Emerging scarcities ............