26 January 2011

Surging food and commodity prices are undermining efforts to tackle global poverty and hunger and  threaten economic growth, said OECD Secretary-General Angel Gurría.

Welcoming the French government’s decision to make commodity price volatility and global food security priority issues of  its G20 presidency, Mr Gurría said:  “Agriculture markets have always been volatile, but if governments act together then extreme price swings can be mitigated and vulnerable consumers and producers better protected.”

“Commodity markets need to function better and more transparently,” Mr. Gurria said.

The OECD believes stronger discipline should be imposed on the use of trade restrictions – on both exports and on imports. OECD work has also shown the need for better public information on short-term production, consumption and stocks, as well as on medium-term market prospects. Greater transparency would help decision-making and avoid market panic, the OECD says.

Trade important for food security

Trade will be increasingly important to food security in the future, as international markets can buffer demand and supply shocks affecting individual countries and provide long-run food security for countries with limited capacity for food production. Deeper markets, with increased volume and more buyers and sellers, are less volatile. For these reasons, concluding the WTO Doha negotiations is crucial.

Priority assistance should be also provided to countries highly dependent on food imports, where high prices create balance of payments problems, says the OECD.  Central to the OECD recommendations is the need for safety net programmes that target the most vulnerable through food distribution, targeted cash transfers or both.

Greater international assistance should also be provided to boost agricultural productivity around the world. Investment in developing country agriculture will be particularly important to both increase food supply and provide much needed income and employment in many less developed economies. In the longer run, country-specific poverty-reduction and development strategies will improve the purchasing power of the most vulnerable and ensure better access to food.

OECD work has also shown that subsidizing biofuel production based on corn, sugar beet or vegetable oil can contribute to higher food prices, with only a limited impact on reducing greenhouse gases. It recommends to use alternative feedstocks – such as cellulosic materials - which produce energy more efficiently, and at the same time to allow more open trade in biofuels and feedstocks.