Price transmission

Ten years after the launch of AMIS and the Food Security Portal’s Excessive Price Variability Early Warning System, managing and reducing food price volatility remains a clear priority for global food security.

As reported earlier this month, global wheat prices declined slightly in June after 12 straight months of increases. The recent decline was based on favorable production prospects in several major producing regions, including Europe, India, and the Black Sea region. Wheat futures prices followed suit, dropping by 6 percent in June.

Food price volatility can present problems for an array of stakeholders, including countries managing their export portfolios, commodity traders, and especially farmers, as unpredictable prices may result in variable income and food insecurity.

The 2007-08 food crisis saw the international price of staple agricultural commodities (such as wheat, maize, soybeans, and rice) more than double; today the international price of many of these commodities is again on the rise. A common assumption is that as the international price of such commodities increases, the domestic consumer price of basic food items such as bread, flour, wheat, corn, tortillas, and rice will also increase. However, the degree of this transmission may vary from country to country and from commodity to commodity.

With all the news of floods in Australia decimating the country’s wheat crop and adverse weather in the US cutting corn and soybean harvests, commodities prices across the globe are again seeing drastic increases, raising fears that we may be witnessing a return of widespread food insecurity and subsequent political and economic turmoil. Moreover, the FAO’s recent statement that global food prices reached a record high in December 2010 has sparked the memory of the crisis in 2007–08 and turned global attention back to the issue of food security.