International grain reserves and other instruments to address volatility in grain markets
AbstractIn the long view, recent grain price volatility is not anomalous. Wheat, rice, and maize are highly substitutable in the global market for calories, and when aggregate stocks decline to minimal feasible levels, prices become highly sensitive to small shocks, consistent with storage models. In this decade, stocks have declined due to high income growth and biofuels mandates. Recently, shocks including the Australian drought and biofuels demand boosts due to the oil price spike were exacerbated by a sequence of trade restrictions by key exporters beginning in the thin global rice market in the fall of 2007, which turned market anxiety into panic. To protect vulnerable consumers, countries intervened in storage markets and, if they were exporters, to limit trade access. Recognizing these realities, vulnerable countries are building strategic reserves. The associated expense and negative incentive effects can be controlled if reserves have quantitative targets related to the consumption needs of the most vulnerable, with distribution to the latter only in severe emergencies. More-ambitious plans manipulate world prices via buffer stocks or naked short speculation to keep prices consistent with fundamentals. Past interventions of either kind have been expensive, ineffective, and generally short-lived. Further, there is no significant evidence that prices do not reflect fundamentals, including export market access.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 5028.
Date of creation: 01 Aug 2009
Date of revision:
Markets and Market Access; Access to Markets; Emerging Markets; Debt Markets; Economic Theory&Research;
Other versions of this item:
- Brian D. Wright, 2012. "International Grain Reserves And Other Instruments to Address Volatility in Grain Markets," World Bank Research Observer, World Bank Group, vol. 27(2), pages 222-260, August.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dwight R. Sanders & Scott H. Irwin & Robert P. Merrin, 2010.
"The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?,"
Applied Economic Perspectives and Policy,
Agricultural and Applied Economics Association, vol. 32(1), pages 77-94.
- Sanders, Dwight R. & Irwin, Scott H. & Merrin, Robert P., 2008. "The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?," Marketing and Outlook Research Reports 37512, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
- Sanders, Dwight R. & Irwin, Scott H. & Merrin, Robert P., 2008. "The Adequacy of Speculation in Agricultural Futures Markets:Too Much of a Good Thing?," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37615, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
- Eugenio Bobenrieth & Juan Bobenrieth, 2006.
"A Foundation for the Solution of Consumption-Saving Behavior with Borrowing Constraint and Unbounded Marginal Utility,"
02-2006, Departamento de Economía, Universidad de Concepción.
- Bobenrieth H., Eugenio S.A. & Bobenrieth H., Juan R.A. & Wright, Brian D., 2008. "A foundation for the solution of consumption-saving behavior with a borrowing constraint and unbounded marginal utility," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 695-708, March.
- Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2008.
"Financial Crash, Commodity Prices and Global Imbalances,"
NBER Working Papers
14521, National Bureau of Economic Research, Inc.
- Gourinchas, Pierre-Oliver & Farhi, Emmanuel & Caballero, Ricardo J., 2008. "Financial Crash, Commodity Prices, and Global Imbalances," Scholarly Articles 3229095, Harvard University Department of Economics.
- Caballero, Ricardo & Farhi, Emmanuel & Gourinchas, Pierre-Olivier, 2008. "Financial Crash, Commodity Prices and Global Imbalances," CEPR Discussion Papers 7064, C.E.P.R. Discussion Papers.
- von Braun, Joachim, 2008. "Food and financial crises: Implications for agriculture and the poor," Food policy reports 20, International Food Policy Research Institute (IFPRI).
- Bardsley, Peter, 1994.
"The Collapse of the Australian Wool Reserve Price Scheme,"
Royal Economic Society, vol. 104(426), pages 1087-1105, September.
- Peter Bardsley, 1992. "The Collapse of the Australian Wool Reserve Price Scheme," Working Papers 1992.17 EDIRC Provider-In, School of Economics, La Trobe University.
- Peter Bardsley, 1992. "The Collapse of the Australian Wool Reserve Price Scheme," Working Papers 1992.17, School of Economics, La Trobe University.
- Williams,Jeffrey C. & Wright,Brian D., 1991.
"Storage and Commodity Markets,"
Cambridge University Press, number 9780521326162, Fall.
- Brennan, Donna & Williams, Jeffrey & Wright, Brian D, 1997. "Convenience Yield without the Convenience: A Spatial-Temporal Interpretation of Storage under Backwardation," Economic Journal, Royal Economic Society, vol. 107(443), pages 1009-22, July.
- Gustafson, Robert L., 1958. "Carryover levels for grains: A method for determining amounts that are optimal under specified conditions," Technical Bulletins 157231, United States Department of Agriculture, Economic Research Service.
- Deaton, A. & Laroque, G., 1989.
"On The Behavior Of Commodity Prices,"
145, Princeton, Woodrow Wilson School - Public and International Affairs.
- Brennan, Donna, 2003. "Price dynamics in the Bangladesh rice market: implications for public intervention," Agricultural Economics, Blackwell, vol. 29(1), pages 15-25, July.
- Wright, Brian D & Williams, Jeffrey C, 1982. "The Economic Role of Commodity Storage," Economic Journal, Royal Economic Society, vol. 92(367), pages 596-614, September.
- von Braun, Joachim & Torero, Maximo, 2009. "Implementing physical and virtual food reserves to protect the poor and prevent market failure:," Policy briefs 10, International Food Policy Research Institute (IFPRI).
- von Braun, Joachim & Ahmed, Akhter & Asenso-Okyere, Kwadwo & Fan, Shenggen & Gulati, Ashok & Hoddinott, John & Pandya-Lorch, Rajul & Rosegrant, Mark W. & Ruel, Marie & Torero, Maximo & van Rheenen, Te, 2008. "High food prices: The what, who, and how of proposed policy actions," Policy briefs 1A, International Food Policy Research Institute (IFPRI).
- Gilbert, Christopher L., 1996. "International Commodity Agreements: An obituary notice," World Development, Elsevier, vol. 24(1), pages 1-19, January.
- Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
- Robles, Miguel & Torero, Maximo & von Braun, Joachim, 2009. "When speculation matters:," Issue briefs 57, International Food Policy Research Institute (IFPRI).
- Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October.
- Eugenio S. A. Bobenrieth H. & Juan R. A. Bobenrieth H. & Brian D. Wright, 2002. "A Commodity Price Process with a Unique Continuous Invariant Distribution Having Infinite Mean," Econometrica, Econometric Society, vol. 70(3), pages 1213-1219, May.
- Gerber, Nicolas & Van Eckert, Manfred & Breuer, Thomas, 2008. "The Impacts of Biofuel Production on Food Prices: a review," Discussion Papers 48193, University of Bonn, Center for Development Research (ZEF).
- Bobenrieth H, Eugenio S A & Bobenrieth H, Juan R A & Wright, Brian D, 2004. "A Model of Supply of Storage," Economic Development and Cultural Change, University of Chicago Press, vol. 52(3), pages 605-16, April.
- Irwin, Scott H. & Sanders, Dwight R. & Merrin, Robert P., 2009. "Devil or Angel? The Role of Speculation in the Recent Commodity Price Boom (and Bust)," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 41(02), August.
- Wright, Brian D, 1979. "The Effects of Ideal Production Stabilization: A Welfare Analysis Under Rational Behavior," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1011-33, October.
- Lin, Justin Yifu & Martin, William J., 2009. "The Financial Crisis and Its Impact on the Global Agricultural Landscape," 2009 Conference, August 16-22, 2009, Beijing, China 53208, International Association of Agricultural Economists.
- Galtier, F., 2009. "How to Manage Food Price Instability in Developing Countries ?," Working Papers MOISA 200905, UMR MOISA : Marchés, Organisations, Institutions et Stratégies d'Acteurs : CIHEAM-IAMM, CIRAD, INRA, Montpellier SupAgro, IRD - Montpellier, France.
- Baffes, John & Dennis, Allen, 2013. "Long-term drivers of food prices," Policy Research Working Paper Series 6455, The World Bank.
- Janvry, Alain De & Sadoulet, Elisabeth, 2010. "Agriculture for development in sub-Saharan Africa: An update," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 5(1), September.
- Lehecka, Georg, 2013. "Have food and financial markets integrated? An empirical assessment on aggregate data," 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 156108, German Association of Agricultural Economists (GEWISOLA).
- Gabrielyan, Gnel & Marsh, Thomas L., 2012. "Domestic and Export Price Formation of U.S. Hops," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124722, Agricultural and Applied Economics Association.
- de Janvry, Alain, 2009. "Agriculture for development: New paradigm and options for success," 2009 Conference, August 16-22, 2009, Beijing, China 53202, International Association of Agricultural Economists.
- Femenia, Fabienne, 2012. "Should private storage be subsidized to stabilize agricultural markets after price support schemes are removed?:," IFPRI discussion papers 1205, International Food Policy Research Institute (IFPRI).
- Galtier, F., 2009. "Comment gérer l'instabilité des prix alimentaires dans les pays en développement ?," Working Papers MOISA 200904, UMR MOISA : Marchés, Organisations, Institutions et Stratégies d'Acteurs : CIHEAM-IAMM, CIRAD, INRA, Montpellier SupAgro, IRD - Montpellier, France.
- Dethier, Jean-Jacques & Effenberger, Alexandra, 2012.
"Agriculture and development: A brief review of the literature,"
Elsevier, vol. 36(2), pages 175-205.
- Dethier, Jean-Jacques & Effenberger, Alexandra, 2011. "Agriculture and development : a brief review of the literature," Policy Research Working Paper Series 5553, The World Bank.
- World Bank, 2012. "Using Public Food Grain Stocks to Enhance Food Security," World Bank Other Operational Studies 11878, The World Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.