Development Matters

Are we ready to prevent the next food price crisis?

By Denis Drechsler, Project Manager, Agricultural Market Information System (AMIS), Food and Agriculture Organization of the United Nations

When prices of staple food crops soared in international markets in 2007-10, it was a wakeup call for many world leaders to take action. In view of millions of families being pushed into hunger, the G20 decided to create the Agricultural Market Information System (AMIS) to combat excessive volatility by enhancing transparency and policy co-ordination in international food markets.

Since its launch in 2011, AMIS has provided more reliable and timely assessments of global food supplies by working closely with the main trading countries of staple food crops. This has created a more level playing field for all market actors to make informed decisions. Even more important have been achievements in the area of policy dialogue. When maize prices spiked in 2012, for example, regular exchanges among the key producing countries helped avoid a repeat of hasty policy action, such as export bans that had exacerbated market turbulences in the past. Through AMIS, it seems, the world is better prepared to minimise the risk of future food price crises.

However, new challenges are already looming on the horizon. With international trade in food commodities more than doubling since the start of the millennium, and most of the world’s supplies originating from just a handful of exporting countries, global food security is becoming increasingly vulnerable to shocks along main transport routes. Poor food importing countries are especially vulnerable to supply shortages in case of disruption. The situation in Yemen is a case in point where millions are on the brink of famine after a sea, land and air blockade has effectively shut off the country from international food deliveries.

In a recent report, Chatham House identified 14 junctures that, if impeded, would critically harm global food trade flows. The importance of these so-called “chokepoints” for global food security has been growing steadily. While a total of 42% of global grain exports was shipped through one or several maritime chokepoints in 2000, this share increased to 55% in 2015. According to the report, more than one quarter of global soybean exports transit the Strait of Malacca; one-fifth of global wheat exports pass the Turkish Straits; and around one-sixth of global maize exports transit the Panama Canal. As the map illustrates, all but one of these 14 trade junctures have experienced disruptions over the past five years.

In view of these trends, discussions are currently ongoing on whether the mandate of AMIS should be expanded to include the monitoring of chokepoint risk. Offering a strong institutional foundation to promote data sharing and analysis, AMIS could assess the potential for disruption and collect information on chokepoint performance, including throughput and congestion. In case of an emergency, AMIS could also provide a mechanism to allow governments to discuss possible solutions.

Examples of recent disruptions of food trade chokepoints

Source: Rob Bailey and Laura Wellesley, Chokepoints and Vulnerabilities in Global Food Trade, Chatham House: 2017.

A recent meeting of AMIS participating countries in Geneva revealed that the main exporters of food crops are generally aware of their own domestic chokepoints. The United States, for example, is closely monitoring its ageing inland waterway system; Brazil has started improving its congested road network; and Russia and the Ukraine are exploring alternatives to shipping cargo through the overstretched Black Sea ports. These are positive developments, especially since Chatham House considers all three chokepoints “most-at-risk.” But even if countries decide to upgrade their transport infrastructure, any investment will take years before bearing fruit.

The current phase of low prices and ample supplies might obscure the vulnerability of the global food trade system. Yet it might only be a matter of time before a localised event at any of these chokepoints sparks a larger crisis. Even a relatively small disruption could lead to panic buying and uncoordinated policy action by countries to secure national food supplies, which would actually mimic dynamics that culminated in the most recent food price crisis.

AMIS has proven capable of monitoring global food supplies for greater market transparency. Considering chokepoint risk in this analysis thus seems a natural expansion of the initiative’s current work programme. Ultimately, if and how AMIS evolves is a decision best taken at the political level to strengthen the international community’s ability to act earlier and prevent a food price crisis rather than react and respond to one.