Mr. Alexander Sarris, Director of the Trade and Markets Division of FAO placed the recent price developments in a longer term perspective. Over the period 1957-2008, the data show that the real prices of bulk food commodities have tended to decrease, he said, but since the mid 1980s the tendency seems to have stopped owing to faster demand growth. Professor Sarris did not believe that price volatility had increased in grain markets on a long term basis. Price spikes had been seen before from 1972-75, from 1993-95 and more recently from 2007-2009. The ratio of global ending stock to utilisation for grains does not appear to be falling significantly on a long term basis.
For the future, Mr. Sarris said that new factors are likely to create considerable uncertainty and likely volatility. These new factors are: biofuels (policies and technological developments), petroleum prices, dollar exchange rates, financial market developments and speculative fund positions, and new investments in agricultural production.
The recent food crisis created mistrust of the international trading system and encouraged moves to promote food self sufficiency, said Mr. Sarris. Many middle and high income net-food importing developing countries have started thinking about investing in food production in other countries with contractual commitments to buy back products. Others are making long term supply arrangements with main exporters;
The FAO representative went on to propose the creation of an International Grain Clearing Arrangement (IGCA). This facility would guarantee that physical supplies are available to execute grains contracts. The IGCA would invest its financial reserves in physical stocks of grain, or in futures contracts so ensuring that there would be liquidity to honour individual contracts in case of non-performance by a participant.
Mr. Sarris also proposed the creation of a Food Import Financing Facility (FIFF). The FIFF would allow developing countries to finance commercial food imports in periods of high food prices. It would cover additional financial needs for commercial food imports in excess of normal commercial food imports.
Finally Mr. Sarris challenged farmer leaders worldwide on some of the fundamental policy issues, including new ways of paying OECD farm support, and support for value chain development and safety-net policies in developing countries.