Mr. Maximo Torero, Director of the Markets, Trade and Institutions Division of IFPRI focused his remarks on the surge in commodity prices during 2007-2008 and the crash thereafter. He said that the ‘spikes’ in world farm commodity prices could not be explained only by the supply and demand fundamentals, even when accounting for the increased demand for biofuels (biofuels account for 30 percent of the positive upward trend in cereal prices). The large ‘price spikes’ in 2007-2009 had two other causes, he said. These were: 1) policy reactions by governments such as bans and restrictions on exports, especially in rice markets, and 2) speculation in futures markets including: an increase in futures and options trading; increased share of non-commercial trading; government hoarding of supplies. In balancing these two factors, Mr. Torero said that policy reactions accounted for about 30 percent of the spikes in basic cereals prices while speculation accounted for 70 percent.
The speaker went on to propose two measures for reducing price volatility and market speculation. These were: 1) a physical grain reserve of 300,000 tonnes for humanitarian assistance, and 2) a virtual reserve and intervention mechanism, backed up by a financial mechanism, to calm speculation. In addition, Mr. Torero called for: investing in counter-cyclical stimulus packages in developing country agriculture, expanded programs for social protection and nutrition, as well as linking small-holder farmers to markets.