1. Do not try to build up grain stock: Per Pinstrup-Andersen

Do not try to build up grain stock: Per Pinstrup-Andersen

At a time when global agricultural commodity prices have declined sharply, World Food Prize Laureate Per Pinstrup-Andersen...

By: | Published: March 4, 2015 1:47 AM

At a time when global agricultural commodity prices have declined sharply, World Food Prize Laureate Per Pinstrup-Andersen, professor of food, nutrition and public policy and applied economics at Cornell University, has a word of caution for developing countries. He has suggested that developing countries including India invest in rural infrastructure to deal with future price spike. In India to launch his book The Political Economy of Food Price Policy, Andersen spoke to FE’s Sandip Das on the future outlook of commodity prices. Excerpts:

Global agricultural commodity prices are currently depressed. What measures can you suggest to developing countries for sustaining growth in the agricultural sector?
We are entering a complacency period. Nobody knows about the next spike in agricultural commodity prices. However, extreme weather conditions, be it Australia, New Zealand or the US, can result in a spike in wheat prices. Investments in rural infrastructure such as roads and electricity would make food suppliers more price sensitive. This would help in dealing with fluctuations in commodity prices. For example, well functioning input and output markets and competitive supply chains should be pursued to reduce domestic price volatility and domestic prices should reflect export or import parity prices.

Elaborate on the trend in global agricultural commodity prices in the last few decades.
Since the mid-1970s till around 2000 or 2001, agricultural commodity prices saw a downward trend in real terms. However, 2007-08 saw a turnaround in global commodity prices and prices rose sharply till reaching a peak in 2011. Extreme weather across many regions contributed to the spike in prices because of lower production and export of commodities such as rice, wheat, corn, etc. Prices are depressed again and it’s anybody’s guess when the next spike in commodity prices will happen.

What would countries like India do?
Do not try to build up grain stock. Poor management of government grain reserves contributed to food price volatility. Instead, create a fund, like a price stabilisation fund, which can be used in case of lower production to import commodities for the domestic market. Higher domestic stocks create inflationary pressure in the global market. India needs to reduce cost of production of crops through various methods. Importing technologies for improving yield would be key, besides creation of a national market would fetch a better price for farmers.

What should be the role of WTO at such a juncture ?
WTO negotiations are needed to strengthen the rules for abrupt and large changes in trade policies of exporting countries.
World market prices should be permitted to penetrate domestic markets to ensure that appropriate price signals are sent to
domestic producers and consumers and to dampen price volatility in the world market.
Targeted compensatory measures could be pursued if needed to protect specific groups, such as poor consumers or producers.

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