La volatilité des prix au cœur de la réforme de la PAC[en] 

Sharp increases in food prices in 2008 sparked riots in a number of countries, including Haïti, Mexico, Egypt, Morocco, Senegal, Uzbekistan, the Philippines, Bangladesh, Thailand and Indonesia. EU consumers also saw dramatic increases in prices of basic foodstuffs, and have become increasingly concerned about the issue (EurActiv 14/03/08).

As global food prices reached new highs in 2008, the European Commission decided to open an investigation into the causes of such sharp increases. The EU executive decided to better monitor developments in agricultural commodity prices, analyse the impact of speculation on prices and investigate the functioning of the food supply chain. 

In December 2008, the Commission adopted a communication  on food prices, proposing policy responses and measures aimed at improving market transparency (EurActiv 11/12/09).

"The CAP health check should already have taken into account price volatility. It destabilises agricultural production and is dangerous for both farmers and consumers," says Dominique Lasserre, an expert at Momagri in Paris. "We need to recognise the necessity to regulate agricultural markets and consider the upcoming CAP reform in an international context," she told EurActiv. 

Momagri describes itself as a "think-tank seeking to provide practical solutions to key international problems in agriculture". It is chaired by Pierre Pagesse, president of French breeder and producer of plant varieties Limagrain, and its members include representatives of the agriculture, health and development sectors.

The Doha trade negotiations have never considered price volatility in their economic models, because volatility has never really been scientifically studied, Lasserre said. However, studies on the subject are now available and should be taken into account in decision-making on agricultural economics, she added.

The Doha negotiations on freeing up global trade have repeatedly failed, due to EU and US reluctance to cut their agricultural tariffs and subsidies. EU protectionism has mainly been driven by France, the biggest beneficiary of EU farm subsidies (EurActiv 22/06/07; EurActiv 26/07/06).

Earlier this month, economists  underlined that concluding current Doha negotiations would only increase price volatility and speculation, while worsening food security in developing countries. Only a few emerging exporting countries, like Brazil, would benefit from liberalised global trade in farm products. They underlined the need to create a new international economic model, which would take due account of the impacts of price volatility and speculation on food security. 

Division of world into ten free trade zones

The Momagri model for such new global order suggests dividing the world into zones according to regional development levels: North America/Mexico, South America, the EU, China, India, Africa, Russia/Ukraine/Kazakhstan, North Africa/Near and Middle East, the rest of Asia and the rest of the world. 

Agricultural trade could then be completely liberalised inside these zones according to common rules based on international consensus, Lasserre suggested.

"The goal of this new classification is to allow measuring of the real consequences of liberalising agricultural markets for each zone, while taking into account their own specificities in terms of risk exposure, so that we can determine winners and losers," Momagri states. 

Rules 

Asked what kind of rules and regulations should govern the zones, Lasserre listed the establishment of grain stocks and market intervention in case of violent fluctuations in food prices as examples. Rules on each zone would be drafted to reflect its potential, but keeping food security as the baseline, Lasserre said. 

She also stressed that it is crucial to protect the zones from external competition in order to give them time to develop their agriculture. "All countries that have developed their agriculture have protected their markets at some point," she noted. 

"You also have to remember that agriculture provides income for 40% of the world population and that only 7%-8% of the world agricultural production is traded. So it doesn't make any sense to liberalise it," she added.