Theme 1: Food Price Volatility
Project: Preventing World Food Crises

Recent drastic volatility in food prices has raised serious concerns about food and nutrition security across the world. While a coordinated response is urgently needed at the international and regional levels, the effectiveness of various country-level responses is also critical for responding to the crisis. Coherent action is needed to help vulnerable populations cope with the hikes in their food bills, to assist farmers in developing countries respond to the opportunity posed by rising demand for their products, and to provide information for evidence-based related macro-economic policies. Since the implications of high and volatile food prices are radically different across countries and population groups, the appropriate policy responses, as well as their scale, prioritization, and sequencing, must be developed and adapted to country-specific needs and conditions.

The goal of this project is to improve food security for the poor in developing countries and increase resilience of developing countries’ food systems against future crises. The project focuses on building a global research-based monitoring and capacity-strengthening device for successful identification and implementation of the appropriate policy actions in response to the food crisis.

  • “Food Price Spikes and Financial Crises: Dealing with Regional and International Market Shocks.” International Food Policy Research Institute 2020 Conference on Building Resilience for Food and Nutrition Security, May 15-17, 2014.
Torero on discusses dealing with Regional and International Market Shocks.
Region: Global
Funding: European Commission

Theme 2: Food Reserves
Project: Assessing Regional Food Reserves to Increase Resilience: Their Role in Safety Nets and in Reducing Price Volatility

The goal of this project is to improve food and nutrition security in ECOWAS countries through an optimal design of a regional reserve mechanism. Specifically, the project seeks to improve the design of an optimal regional ECOWAS reserve system that combines emergency reserves, complements safety net programs and helps reduce excessive and abnormal price volatility.

Physical reserves have been used at national, regional and international levels at different times throughout history to control price spikes and reduce price variability. For decades, large countries such as China and India have kept a significant level of physical reserves because of their size and the effects that their entry into world markets during harvest shortfalls would have on prices. The U.S. operated a farmer-owned reserve for several decades, which gave farmers loans and money towards storage costs in exchange for following requirements for when this stored grain could be sold until the farm bill passed in 1996. Many African countries, including Burkina Faso, Ethiopia, Mali, Mozambique, Niger and Tanzania, established nationally-based food-security reserve stocks between 1975 and 1980. This was during a time of heavily managed agriculture and, because global grain prices were extremely high, many of these governments did not trust world markets to be secure sources of grains during an emergency. However, it proved to be quite difficult to accurately estimate how much grain was actually needed in these reserves. There was a tendency to overestimate the amount of grain needed in an emergency. Other difficulties included the use of the reserves in normal market operations by the parastatals, insufficient resources to replenish reserves, and the unwillingness of donors to support these activities. They eventually led to the disappearance of these food security reserve stocks in most countries.

The price shock in the 1970s again prompted international interest in grain reserves and the United Nations Conference on Trade and Development organized discussions on the possibility of establishing international grain reserves. The idea was to hold stocks nationally while managing them internationally, but issues of trigger price levels, stock levels and contributions, and special provisions for developing countries led to failed talks and the proposed international grain reserve was not established. Interest in regional reserves also increased after the food price spike in 1973–74. The Food and Agriculture Organization noted the establishment of the Association of Southeast Asian Nations’s (ASEAN) Food Security Reserve, which was never operational and also a proposal by CILSS, or the Inter-State Committee on Drought in the Sahel, to establish a regional reserve in the Sahel. The idea of creating a regional food reserve for Mediterranean countries was also put forward, but it was not until the recent food crises that the ASEAN initiative was reactivated.

Interest in the establishment of strategic grain reserves was revived following the liberalization of the cereals markets during the structural adjustment of the 1990s. Governments attempted to insure against the failure of the private sector during this period, but many of the experiences in managing these reserves were similar to previous attempts at grain reserves. Mismanagement, corruption, damaged donor relations and erroneous estimates of consumption and production plagued governments as they tried to manage these reserves.

Following the food price crisis of 2007–08 and after October 2010, there have been numerous proposals put forward to prevent such events from occurring again. The proposed plans address a range of ideas for improvement, including physical reserves at different levels, virtual reserves, improvements in information and coordination, trade facilitation and others. In terms of storage, emergency reserves for food aid, internationally coordinated public grain reserves, and national and regional stocks have been proposed. More than ten proposals were put forward to prevent price spikes and price volatility in the future. These proposals can be grouped as follows: information and research, trade facilitation, reserves and stocks, financial instruments, and regulatory proposals. There have been several proposals on physical reserves: emergency reserves; international coordinated grain reserves, and for rice; regional reserves; and country-level reserves. The emergency reserves is clearly for humanitarian purposes rather than to reduce excessive price volatility. The other three mechanisms had been proposed as ways through which excessive price volatility can be reduced. As a result, the G20-Paris decided to push forward a pilot regional humanitarian reserve and ECOWAS accepted to implement this pilot in their region.

Countries: Burkina Faso, Ghana, Mali, Niger, Nigeria, Senegal
Funding: European Commission

Theme 3: Index Insurance
Project: Innovations in Insuring the Poor

Risk characterizes life for many of the world’s poorest households. They are more likely to be located in environments where livelihoods are highly susceptible to weather and price variability and where health risks are pervasive. When these risks are uninsured, they not only reduce the current welfare of poor rural households, but also threaten future income growth and thus perpetuate poverty. Reducing the risks faced by poor households, and enabling poor households to better deal with bad events when they do occur, is essential to improving their welfare in the short run and their opportunities for income growth in the long run.

This project considers how to increase the risk management mechanisms available to poor households. The focus is how to develop insurance markets, along with other financial instruments such as credit and savings and ex post mechanisms such as social protection policies.

Region: Global
Funding: CGIAR