The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Is the G20 doing anything useful on food security?

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Do we even have better global market information on food commodities?

Rice was a crisis commodity in 2008.  Something like 2 billion people rely on rice as a daily staple and prices were spiraling out of control.  Rice prices were one of the most dramatic features of the “global food price crisis” that exploded into headlines, caused riots in many developing countries, and alarm among political leaders across the world in 2007 and 2008.

Rice Export Prices 2004-8Seeing the problem and recognizing the threat to international markets and political stability, the G20 leaders embraced food security as a focus, starting in 2010 with France leading the charge.  A dazzling sequence of meetings were convened and papers commissioned.

For all the concern, and at the end of all this activity, very little was actually done.  The G20 has declined to take up the structural issues around food prices and global food security. Probably the most significant accomplishment of the G20 on food security has been the creation of the AMIS, the Agricultural Market Information System.  The idea was to create a shared resource for better information on international food commodities.

So, three years later, do we have better global market information on food commodities?  Especially rice, since it’s such a sensitive and political food?

Not really.

G20 countries produce 80 percent of the world’s rice, so you might think that AMIS could give us some good information on the situation with global rice production and inventory.  But this chart shows how bad things are:

Rice Stock Differing Estimates 2013

China is the world’s biggest rice producer and consumer.  What happens there dwarfs almost everything else in the market.  China is a member of the G20.  But how much rice does China have?

Here we see two estimates of how much rice will be left at the end of the 2012-2013 growing year.  China could have 45 million tons in storage at the end of the year.  Or it could have more than twice that amount.  Depends if you believe the US Department of Agriculture or the UN Food and Agriculture Organization.

That’s a pretty big spread between estimates.  Either China will hold about one-tenth of global rice production at the end of the year.  Or it might hold twice that.   Or maybe neither is right;  because the truth is we really don’t know.

It’s important.  Knowing if there’s rice available – whether China might be buying or selling – determines a lot about the price of rice globally and whether the market is stable.  But we don’t know.

Comparatively small factors can have a big impact on rice markets.  India isn’t a big rice exporter – about 5 million tons a year.  But an export ban announced by India in 2007 was one of the primary drivers for panic in rice markets that sent rice prices through the roof.

If you’re an analyst trying to guess what prices will be, this is a mess.  More importantly, if you’re concerned about food security and trying to prepare for emergencies and price spikes, there’s little here that helps.  The difference between the two estimates for Chinese rice stocks could consume all global rice exports.

No one really knows or has good information. China is opaque, even though it’s a huge factor in global food prices.

AMIS doesn’t seem to be cracking that nut, much less other information gaps, like how much big trading companies hold.

So, what is the G20 accomplishing on global food security?

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  1.  avatarStephen Jones

    For the writer of this article and to anyone who is following international rice market prices and stocks – at http://www.livericeindex.com, you can find impartial rice assessments and excellent analysis of the rice markets, including details of trade and stocks. Most of the rice industry’s leading traders, exporters, importers, financers, millers are already signed up and if you need any further information just contact us through the website.

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  2.  avatarAbdolreza Abbassian

    I find it gratifying that the outreach of AMIS is such that it is provoking interest in discrepancies of estimates and forecasts, which have been recognized as one of the fundamental problems in global supply and demand analysis of major foodstuffs, rice being no exception. While I do share your frustration in how slowly the international community is responding in its efforts to alleviate world hunger and poverty, I cannot share your pessimistic evaluation of the G20’s AMIS initiative. Without going into details of what AMIS has been set to achieve (all background available on its website) the idea behind AMIS has been, initially at least, to deliver on two fundamental goals. First, to enhance the quality of data used for global market analysis of four important crops (of which rice is one) and second, to promote closer dialogue among major players (leading producers, exporters and importers of the four crops) on policy initiatives that could negatively influence markets as they did in the case of rice in 2008, to which you refer.

    With reference to the first of these goals, the AMIS statistical tool now provides access to not only FAO balances for the G20 countries which, before AMIS, were not in the public domain, but also to the same balances from the International Grains Council (a member of the AMIS Secretariat) as well as similar data from USDA database. The reason for providing this information and, more importantly, for providing user-friendly tools for the public at large to be able to extract the relevant data and observe the differences, was indeed to highlight where the biggest discrepancies are, with the hope that this would encourage more scrutiny by all concerned, including the countries, leading them to improve the quality of their statistics. This work and, indeed, any build-up of a statistical database, cannot be considered an overnight activity. AMIS was initiated three years ago but launched in September 2011; collaboration between the AMIS Secretariat and individual participating countries in terms of exchange of information and data began only one year ago. I believe that, in one year, AMIS has achieved a lot. Today, all twenty-eight countries participating in AMIS are collaborating with the Secretariat. Today, all those countries have reviewed the historical data series concerning the AMIS crops for their countries and subsequently provided feedback which has greatly improved the quality of the data although this may not be so apparent to those not closely following this process. Very soon, AMIS will be publishing its own data based on feedback received and inputs from its Secretariat (composed of ten Organizations). Furthermore, by September 2013, which will be two years into the making of AMIS, short-term forecasts will be provided on all the parameters concerning supply and demand. I sincerely question if colleagues in Oxfam and other agencies would be able to tell us of any other initiative which has been able to get to where AMIS has at such a pace.

    Now let me turn to the other goal of AMIS, which I saw no mention of in your blog and yet constitutes a very tangible achievement, to say the least. If you recall, last summer, with rumours of yet more export restrictions being imposed in the Black Sea region, AMIS had a very strong role in promoting discussions among these countries so as to minimize the impacts of such rumours on the market. At the same time, AMIS was intensively engaged in a dialogue with the countries to prevent unwarranted restrictions which could have had undesirable impacts on world markets as had been the case back in 2007-08 and again in 2010. Again, in my view, these efforts did pay off and, as we all witnessed, in spite of serious tightness in a number of exporting countries, export restrictions were not put in place. I think AMIS is an initiative with the strong potential to prevent unilateral actions which often bring undesirable consequences to global markets and lead to grave food security dilemmas, especially in poorer countries.

    Finally, let me say a few words on China and its stocks. The issue of China’s stocks is an old one and, as is widely recognized, not one that can be solved quickly. It is true that USDA, FAO and perhaps other organizations carry varying numbers for China’s stocks and perhaps none, as you also underlined, are correct. China’s stocks numbers are derived from what we know about production and consumption in the country. Back in the late 1990s, FAO was the first agency to see the need to revise estimates of China’s cereal stocks; the estimates that FAO had at the time were extremely low and very much in line with those published by other agencies. Following two years of studies of China’s cereal sector with the focus on stocks, FAO revised the level of China’s stocks, not by little but with a mighty ten-fold increase. This revision doubled FAO’s estimates of world cereal stock levels and, as a result, FAO had to drop its most important indicator of global food security: the 17-18% world stock-to-use ratio, which for over two decades was referred to as the minimum benchmark safe level. Unfortunately, for all its importance and the urgency, we have not yet been able to establish a new threshold ratio to serve the same purpose.

    While FAO took the lead in revising the estimates of cereal stocks in China, other agencies followed suit almost a year later and, for some time, the stocks estimates published by FAO and other agencies remained close and, in fact, they still all for most crops, with the exception of rice. One reason for the current discrepancy between FAO and USDA on rice stocks levels is the assumption about the level of food consumption which, in the case of FAO, is slightly different and this, over time, has resulted in estimates of inventories which now appear higher than those published by USDA. The fact is that size matters! When doing this type of supply and demand analysis or revisions a country as large as China, a very small difference in the numbers for annual per capita consumption could result in significantly different estimates for ending stocks.

    I’m happy to say that China has been extremely forthcoming in its collaboration with AMIS, in particular with regard to tackling this particular issue that you have raised. It is expected that, with the continued support from the country, we will be able to derive a more accurate picture of the domestic grain situation in China and hopefully also better stocks estimates. On 6 June, the OECD/FAO Agricultural Outlook report will be launched in China. This work, which looks forward ten years, will also include a special chapter on China and provides further evidence of the continued collaborative efforts, not just among international organizations (OECD is also a member of the AMIS Secretariat) but also with countries.

    I apologize for this long reply to your blog post but, as I said at the outset, I am gratified that AMIS is beginning to get attention, albeit a critical one. All of us in the AMIS Secretariat welcome this attention because, given its ultimate objective of achieving market transparency, the last thing we wish would be to hide important discrepancies and to shy away from expressing concerns and difficulties faced by AMIS in achieving its goals.

    I have great respect for Oxfam and, as a grain analyst and as someone who has for many years followed food aid and food assistance matters, I’m always impressed by the dedication and great efforts made by Oxfam. I sincerely hope that your views on AMIS will reflect the same objectivity for which your organization is known.

    Kind regards,

    Abby

    Abdolreza Abbassian
    AMIS Secretary
    Food and Agriculture Organization of the United Nations
    Trade and Markets Division (D-804)
    Viale delle Terme di Caracalla – 00153 Rome
    Tel. +39 06 57053264
    E-mail: Abdolreza.Abbassian@fao.org

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