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In August 2010, a summer drought prompted major grain producer Russia to begin banning grain exports, causing jitters in global markets and reminiscent of the food price spikes of 2007-2008. As the media began to sound the alarm about a resurgence of food crises, FAO moved quickly to convene an extraordinary session of the Intergovernmental Group on Cereals and Rice (IGG). Despite the short time frame, more than 100 countries were represented, demonstrating the world’s desire for accurate market information from a neutral source. The meeting helped calm markets and avert a crisis, and it came up with the idea of a new Agricultural Market Information System. Its goal was to reduce price volatility by making world commodity markets more transparent and efficient.
From mid-2006, FAO began to see a sharp increase in demand for supply and demand analysis of major food crops – not only from governments and the media, but also increasingly from the private sector, including major investment banks. Recognizing this, FAO began publishing a monthly Food Price Index in 2007, which has become a benchmark for global food prices and plays a key role in helping markets keep a close eye on international prices of basic foods, and in supporting governments and markets during the 2007-08 food price crisis. FAO has established itself as a reliable, neutral, non-market provider of market information by providing governments and the private sector with the complete and accurate market information and forecasts they need to make informed decisions.
Therefore, when food prices on international markets began to rise again in 2010, FAO recognized the need to provide timely and tangible evidence that the global supply situation was not as dire as it had been in 2007. FAO convened an extraordinary session of the Intergovernmental Group on Cereals and Rice to provide supply and demand updates and forecasts, and to show that current supplies could meet projected world demand. Despite the short time frame, more than 100 countries were represented, demonstrating the global thirst for accurate market information from a neutral source. FAO’s rapid response was enough to calm very nervous markets, thereby mitigating the potential for speculation and hoarding, which could have led to higher prices and artificially restricted food availability for those least able to bear the burden, especially in less developed countries.
Transparency and Trust
The IGG meetings also provide a forum for exporters and importers to discuss what actions should be taken in the event of future market volatility. This demonstrates the importance not only of transparency in reporting but also of building trust in the source and accuracy of market data.
Furthermore, as food prices began to rise again in 2010, the G20, at its November 2010 Seoul Summit, included global food security as one of the nine pillars of its multi-year development action plan. This prompted FAO to work with a number of relevant international organizations (IFAD, IFPRI, WFP, OECD, World Bank, UNCTAD, the UN High-Level Task Force and WTO) to conduct a study on how to improve the management and mitigation of food price volatility without distorting markets. The report submitted by these international organizations to the November 2011 G20 Summit in France included ten recommendations, one of which called for the establishment of an Agricultural Market Information System (AMIS). The G20 leaders approved the recommendation to establish AMIS as an open global agricultural market information system that would closely monitor major developments affecting world markets and rapidly report unusual market situations, while also working to improve the quality of data, market analysis and forecasts at both national and international levels.
By hosting the Agricultural Market Information System Secretariat at FAO, the G20 is enabling the initiative to leverage FAO’s existing networks and systems to provide the information needed to avoid or quell unfounded market crises – information that can go beyond the numbers in agricultural statistics to provide a representative picture of what is really happening on the ground.
market prediction
For example, FAO publishes several market reports throughout the year, including the biannual Food Outlook, which forecasts world production, consumption, trade and stocks using data compiled and analysed by FAO commodity experts. The Food Outlook also incorporates expert input from FAO networks into its forecasts to fill statistical gaps and develop market analyses that go beyond numbers. Thus, in 2010, FAO was able to draw on its established networks involved in production and trade at local, national and regional levels, which meant that it could respond to requests for market conditions and provide reports that reflected reality. FAO has also launched an initiative to improve the quality of global statistics.
The AMIS Secretariat includes the nine international organizations that originally proposed the G20, with the Secretary of the FAO Intergovernmental Group on Cereals also serving as AMIS Secretary. As part of its efforts to increase market transparency, AMIS has established a Rapid Response Forum, where policy experts from major producing and importing countries meet when food crisis alerts are raised. Forum members assess market information and analysis published by the AMIS Secretariat, issue regular media statements on the impact of the situation on food security, and coordinate the response of governments. Although the founding members of AMIS are members of the G20 (the world’s 20 largest economies), seven non-G20 countries have been invited to join because of their importance in world markets. AMIS has also established a collaborative website that provides free access to market information, including a unique database tool that provides short-term forecasts and accurate baseline data that will enable the international community to make fact-based decisions to respond to emergencies.
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