12 Apr, 2012

UN Debate on Food Price Spikes Exposes Commodity Market Manipulation, Control

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UN Headquarters, 11 April 2012, UN Department of Public Information — With more than a billion hungry people around the world now facing increasingly unstable food prices, collective will was needed to end excessive market speculation in food and other commodities, experts emphasized today as the General Assembly took stock of the “human tragedy” disproportionately affecting the world’s poorest and most vulnerable.

“Action to curb food price volatility is essential,” said Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development in the Department of Economic and Social Affairs, who spoke on behalf of United Nations Secretary-General Ban Ki-Moon. The current situation, in which consumers were increasingly at risk of sudden drops in purchasing power, was unacceptable, he stressed, describing food as the foundation for a decent life and a basic human right. The priority for agriculture should be to produce the nutritious food that people needed and to ensure that it was accessible at all times, he added.

He recalled that after two decades of falling food prices and reduced public investment in food-related agriculture, the structural problems in the world’s food systems had become apparent in 2006. Since then, worries about insufficient supply to meet growing demand had risen, he said, noting that they had been compounded by the growing impacts of climate change as increasingly unpredictable weather also made agricultural production and prices more erratic and unstable. Some major food-exporting nations had reduced their exports, cutting supplies sharply. Prices had started to rise and importers had been forced to pay much more for food commodities.

Today’s meeting was a critical opportunity for Member States to consider what more they could do to address the factors contributing to food-price volatility, he continued. The United Nations, through its High-Level Task Force on the Global Food Security Crisis, was already working with the Group of 20 (G-20) and other key partners to address the structural challenges afflicting world food systems, promoting in particular the twin-track approach of increasing production and ensuring access to social protection and safety nets. However, more remained to be done, he cautioned. “Let us, together, continue our vital work to achieve the first Millennium Development Goal (on ending hunger) and all others that depend on it,” he stressed.

“Hungry man is an angry man”

“Food price increases have become a human tragedy of enormous proportions,” declared President Leonel Fernández Reyna of the Dominican Republic, the keynote speaker. The world was suffering from a “recurrent condition” of food- and oil-price volatility, with more than 150 million additional people having joined the 925 million already hungry people in 2009 alone. Besides directly impacting health, food insecurity had led to a lack of hope and given rise to widespread apprehension and fear, he noted. “A hungry man is an angry man”, he warned, pointing out that more than 60 nations had recently been shaken by food-price-related riots, political unrest and turmoil. Many households now faced tough choices between paying for food, shelter, medicine or education, he said, pointing out that gains made in poverty reduction were at risk.

It was important to note that most of the world’s poor lived in net-food-importing nations, he continued. The international community must, therefore, design and implement policy options to overcome the challenge of high and volatile prices, and the first question in that respect was whether they were due to market fundamentals or other factors. Some had pointed to increasing demand for food in China and India, weather conditions, rising transportation costs, the use of food products to produce biofuels, geopolitical tensions, the application of subsidies and other factors. However, increased investment in food and other commodity markets had also played a major role, he pointed out, adding that that “major factor” must be examined more closely. The problem had become a serious concern for the political stability of developing countries around the world and for the well-being of billions of people.

Nassir Abdulaziz al-Nasser (Qatar), President of the General Assembly, said the topic under consideration presented a set of issues that were of deep concern to all Member States. Major questions had arisen, including how the spike in prices had affected development. What could be done to limit its impact on vulnerable populations in developing countries? he asked. What was being done to address its root causes?

Recalling that General Assembly resolution 66/188 of 2011 recognized the need to improve the adequate regulation and functioning of commodity markets to address volatility, he underscored the need for active measures to address high food and fuel prices, with the goal not of replacing working financial institutions, but of deciding where and when an issue had arisen with enough urgency that new methods should be considered. States should reason together on what, if any, further processes were required. While the debate was burdened by complex and challenging issues, “it will ultimately be a political debate”, he noted.

Least developed countries most vulnerable

Desra Percaya (Indonesia), Vice-President of the Economic and Social Council, stressed the importance of fortifying international policy and coordination in the fields of food security and economic development with the aim of ensuring that food and other markets ran efficiently, leading, in particular, to transformational social and economic development in the world’s poorest countries. That was an urgent task that must be undertaken by all stakeholders, he stressed, noting that least developed countries were the most vulnerable and suffered the severest effects.

He called on Member States and all stakeholders, working as one, to take collective responsibility to secure the fundamental right of all people to “unfailing” access to food, acknowledging in that respect the vital role that the Organization — particularly the Economic and Social Council — should play in facilitating coordination across the United Nations system. He expressed hope that today’s debate would generate “robust consensus” and concrete recommendations to that end.

During a discussion titled “Financial investment in commodity markets: motivations, mechanisms and impacts”, expert panellists decried the excessive speculation that had dramatically distorted the prices of food, putting it out of the reach of millions of people. Moreover, investments in food and related futures — which had surpassed $400 billion last year — had reduced staple foods from tangible products to abstract concepts designed to make money, they said. “We are producing processes that are systematically wrong over a long period of time”, one panellist added, warning that when food became something “virtual”, it was no longer food.

Speakers in the afternoon panel — titled “Policy options to address excessive price volatility in food and related financial commodity markets” — focused on policy options to address excessive price volatility in food and other commodity markets. Representatives of intergovernmental agencies described efforts to advise member countries on how to create enabling environments in order to build resilience and create national safety nets, while other panellists outlined historical attempts to regulate markets. Also widely discussed were ways in which to end the gambling on oil and agricultural commodities.

Earlier, Assembly President Al-Nasser (Qatar) acknowledged the 8.6-magnitude earthquake that had struck Indonesia just hours before the opening of the meeting, extending support and sympathy to that country’s people.

Panel Discussion One

The panel discussion this morning on “Financial investments in commodity markets: motivations, mechanisms and impacts” was moderated by Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development at the United Nations Department of Economic and Social Affairs. It featured Daniel Titelman, Chief for the Financial Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC); Wei Xiong, Professor at Princeton University; Keiichi Miyata, Director and Head of the Financial Infrastructure Studies Division for the Institute for Monetary and Economic Studies of the Bank of Japan; Heiner Flassbeck of United Nations Conference on Trade and Development (UNCTAD); and Frederick Kaufman of the City University of New York (CUNY) School of Journalism.

Opening the discussion, Mr. SUNDARAM said that global financial liberalization had had many notable consequences. Indeed, there was no evidence that financial globalization, as it was termed, would enhance economic growth; on the contrary, it had exacerbated financial instability. There had been a greater frequency of currency and other financial crises. Significant financial “engineering” and innovation now existed, as well as many new mechanisms that had exacerbated the consequences of cross-border flows. The commodity futures markets had changed from mechanisms aimed at smoothing commodity price cycles into instruments that exacerbated commodity price volatility.

Supply and demand, he said, still played major roles in global commodity prices. However, with the decline of public investment in agriculture, the price increases that had temporarily levelled off had now begun to rise once again. In that context, it was important for today’s discussion to distinguish between price levels and price volatility. “We are dealing, in a sense, with a moving target”, he said, noting that there would always be innovation and changes in the area of global financial markets. That made regulation all the more difficult, he added.

Mr. TITELMAN, reviewing the price indexes of commodities between 2004 and 2011, said that the volatility of commodity prices had increased in the post-crisis period, and that there was now an “upward trend with high volatility”. There were both structural and financial reasons for that situation. High growth in emerging market economies had resulted in greater demand for raw energy and materials, and demand pressures had been exacerbated by supply factors such as low productivity and output growth in agriculture, high energy prices, and climatic factors. However, “financialization” — the transformation of commodities into a financial asset — had also played a major role, and the rise in the prices of commodities, in turn, had contributed substantially to the generation of inflationary pressures. He cited, in that regard, the example of high inflation in the Latin American region.

Long-term and coordinated strategy needed

The rise in food prices had had a direct impact on the poverty rate in low- and middle-income countries, pushing as many as 44 million people into poverty between June and December 2010, alone. The burden of the rise in prices had fallen mainly on the group of countries that were net commodity importers; within countries, the rise disproportionately affected the poorer segments of society. Food prices had created inflation and problems with exchange rates, and small and medium-sized enterprises — which employed large percentages of the population of low- and middle-income countries – were highly affected. An effective and efficient response required a long-term and coordinated strategy at national and global levels, including lowering the price of food imports, stabilizing the domestic supply of agricultural products, ending excessive speculation and ensuring risk reduction through minimum price practices, among other measures. At the regional level, countries could help each other to face financial shocks.

Mr. XIONG, summarizing his recent research on the financialization of commodities, explained how commodity prices of oil, soybean, cotton, live cattle and copper, among others, had been synchronized over a period of time. He listed possible causes for price volatility in 2008 and 2009, including emerging market booms; global economic recession; global warming; political instability; and the adoption of biofuels.

However, he said that the financialization of commodities had contributed to commodity price volatility and that the dramatic difference in prices between indexed commodities and off-indexed commodities might indicate the potential impact. Commodity markets were changing and called for caution in interpreting price movements. Consumers tended to hedge little and thus bore negative effects. He proposed that consumers hedge, if possible, but acknowledged the difficulty of doing so, owing to a lack of sophistication. He stressed the need for the United Nations to help in that regard.

Mr. MIYATA, who was also the coordinator of the “Group of 20” (G-20) working group on commodities, said that the working group’s mission was to conduct a fact-finding exercise in order to understand the evolution and drivers of commodity price fluctuations. The group had focused on both fundamental and financial drivers of the fluctuations, and had explored the consequences of the fluctuations and the relevant policy implications. Its report had pointed out that rapid global financial integration and increased contribution to global growth by emerging market economies had been among the factors causing the rise in prices. In his view, supply constraints and low investment in commodity production had reduced producers’ ability to keep up with rising demand. Some Governments, in response, had adopted trade barriers in an effort to ensure domestic food and energy security. However, those same barriers could also distort prices internationally.

“Proper functioning of global commodity markets is vital”

Among financial drivers, increased investment in commodity markets had contributed significantly to the rise and volatility in prices. Large financial flows associated with the “herding” behaviours of financial investors could cause price instability, he said. The views of the group had been mixed with regard to the impact of financial factors on commodity price levels, however, as it was difficult to clarify whether the fundamental or financial drivers had caused the rise. Global monetary conditions — in particular lower interest rates and high expected demand — had become “accommodatative” for speculative investment.

Turning to the policy implications for the current situation, he stressed that “supporting the proper functioning of global commodity markets is vital”. That included, among other things, enhancing the stability of commodity markets and improving data transparency. He concluded that it was important to avoid policymaking with only a domestic perspective in mind, and instead, advocated for the adoption of a global perspective.

Taking the floor, Mr. FLASSBECK noted that the financialization of commodity markets had continued unabated. Commodity investments under management had surpassed $400 billion in the second quarter of 2011; the futures market was much bigger than any “real” markets, he said. Indeed, markets were moving further away from “reasonable, fair or equilibrium prices”. It was clear that there was a “new world” with respect to global commodities markets, he said, stressing the need for the international community to analyse the situation critically. “Is [the rise in prices] excessive?” he asked, answering with a resounding “yes”.

He described the relationship of prices and actual demand by citing the example of the “false” relationship between Brazil’s currency and that of Japan. “These markets are dramatically distorting the price” of food and other commodities, he stressed, adding, “we are producing processes that are systematically wrong over a long period of time”. Volatility was not the only concern; indeed, price levels themselves were something to worry about. “We have to reconsider what is a normal market process” and how that was overlaid by processes that were dominated by herding behaviour, he said.

Mr. KAUFMAN said that “our daily bread” was the most precious resource on Earth. The irony was that the world needed a stable price for an inherently unstable item — in fact, food was seasonal. Commodities markets had been created to ensure stability in the prices of that bread, he said, describing several of the major price spikes and shocks over the course of history. In 1991, the investment bank, Goldman Sachs, created the Commodities Index Fund, which held funds in commodities for a long period of time. Hundreds of billions of dollars were poured into those new commodities markets. However, markets had not been intended for such long-term investments: “the grain of 30 years ago is worthless”. As a result, “demand shocks” had had a subversive and distorting effect on the market. Billions joined the ranks of the hungry.

“Time to re-make markets”

“We have to remember that people made these markets”, he stressed, adding that it was time to re-make them through regulations. “Position limits” were needed to prevent large transnational banks from taking such a huge share. “The world’s bankers are really not that interested in the world’s markets — they are interested in money.” In addition, more transparency was needed to avoid secretive deals and currency movements. “Our age has fallen in love with the virtual, with the derivative, with the indexical. But when food becomes something virtual, it is no longer food.”

Following panellist presentations, the delegate of Chile, on behalf of the Community of Latin American and Caribbean States (CELAC), highlighted the impact of financial speculation, saying “the excessive volatility of commodity prices adds an extra pressure to markets and, in particular, to commodity-dependent developing countries and economies in transition”. The Community called on the United Nations to exercise its leverage in order for governance to properly address that phenomenon from an inclusive perspective.

The representative from the delegation of the European Union said the United Nations must support ongoing initiatives that had a concrete impact on the most affected, such as the Agricultural Market Information System (AMIS) implemented by the Food and Agriculture Organization (FAO), as well as risk management tools, or the Economic Community of West African States (ECOWAS) pilot project of emergency reserves in West Africa.

The representative of Egypt said his country, as an African and developing nation, as well as one of the main net-food-importing developing countries, asked Mr. Xiong to suggest actions that could be taken to protect consumer countries from the impact of price volatility. In response, Mr. XIONG urged the United Nations and other international organizations to help consumer countries without sufficient financial capacity and sophisticated expertise through such measures as designing hedge strategies to meet the minimum consumption need.

The delegate of Bangladesh said there had been no references made in the remarks to the least developed countries “bearing the brunt” of the situation, and asked panellists how those States could position themselves in tackling the impact of price volatility.

In closing comments, Mr. FLASSBECK underscored the need for staying ahead of the fast-moving markets, saying that a failure to do so would result in a failure to “rescue the poorest from shocks”.

Delegates from Mexico, Uruguay and Brazil also spoke.

Panel Discussion Two

Moderated by José Antonio Ocampo, Professor of Professional Practice in International and Public Affairs at Columbia University, the panel — “Policy options to address excessive price volatility in food and related financial commodity markets” — featured presentations by David Hallam, Director, Trade and Markets Division, Food and Agriculture Organization (FAO); Michael Greenberger, Professor, University of Maryland School of Law; Peter Kerstens, Counsellor, Economic and Financial Affairs Section, European Commission; Bruce Tozer, independent expert and commodities trader; Jeffrey Sachs, Director, The Earth Institute, Professor of Sustainable Development and Professor of Health Policy and Management, Columbia University; and Leonel Fernández Reyna, President of the Dominican Republic.

Mr. OCAMPO opened the discussion by stressing the need for market regulation and for the creation of financial and other instruments to protect producers from food-price volatility, which hindered the very poor in particular.

Mr. HALLAM said that in addition to issuing regular data on food-price fluctuations through its food price index and other informational tools, FAO offered Governments policy analysis and guidance on how to address volatility. The agency had played a key role in helping the G-20 prepare its 2011 report on volatility, which shed light on its AMIS. Since 2006, FAO had predicted the 2008 global economic crisis, but its warnings had fallen on deaf ears. “We have great hope that AMIS will be a better vehicle for informing the world about impending market vulnerabilities”, he said, adding that the upward shift in average food prices and increased price volatility were “probably here to stay at least in the medium term”.

He said price volatility was a result of well-publicized factors such as growing demand in emerging economies, the expanded use of biofeed stocks and decreasing crop yield growth, coupled with growing interest in agricultural markets among financial actors. Also driving it, however, was the fall in recent years of major grains such as maize, which remained at dangerously low levels, as well as bad policy choices like restrictions on exports, which negatively impacted markets. Little was known about how exchanges worked, he said, noting that over-the-counter trading, especially high-speed or algorithmic trading, was still a grey area.

Muted response to high prices

Much had been said during the morning discussion about the impact of price volatility on poor consumers, but there had been no mention of the muted response to high prices by non-member countries of the Organisation for Economic Cooperation and Development (OECD) and Brazil over several years. FAO’s detailed review of OECD member countries’ policy responses to price volatility showed that they had had either very little impact or were counterproductive. Despite diverging views on biofuel policies and financial market regulation, everyone agreed on the need for greater transparency and better regulation of agricultural and commodity markets. AMIS aimed to monitor and provide better information on international food markets, he said, noting that it issued alerts when warranted and promoted more coherent policy responses to address heightened volatility. While most AMIS members were G-20 nations, any State could join.

Mr. SACHS, expressing scepticism about the pronounced impact of financial speculation on excessive food-price volatility, said two essential needs were supporting agriculture and taking measures against climate change. The focus on the impact of financial markets actually diverted attention from those underlying issues, he noted. To illustrate the severity of the food crises in Africa, he described his recent experience in Mali, where he had been begged for help to drill more wells. “There are droughts, hunger, Governments overthrown and rebellions” all over the region, he said.

The international community had barely responded to the needs there, he continued. “Everyone is tired.” Financial markets would not solve food insecurity, he said, stressing the need to increase food production by supporting smallholder farmers and taking the threat of climate change more seriously. Referring to the pledge made by the Group of Eight (G-8) nations three years ago, he said they had not delivered on their promises. “Rich countries can absorb high food prices, but food-deficit and net-food-importing countries bore the full brunt,” he said. Pointing to the inability of developed nations to help, he said “pleas are falling on deaf ears”.

Mr. GREENBERGER recalled that in 1933, United States President Franklin Roosevelt had ushered in financial regulations to rescue the country’s economy from the Great Depression and had given commercial banks control over most of the market. Food producers and consumers had used hedging on commodity futures markets to provide them with liquidity, reduce extreme price distortions and reduce financial risks. But such rules had been relaxed in recent years, turning markets into casinos, he noted, adding that betting was now largely in the hands of investors, who were buying long contracts that far exceeded the world supply of commodities. Today’s speculative activity controlled 80 per cent of the market, while commercial activity stood at just 20 per cent. The $500 billion that United States investment banks Goldman Sachs and Morgan Stanley had invested when trading in futures contracts in 2011 would not help farmers in Africa, particularly small-scale farmers, he pointed out.

Curb betting on commodity prices

“If you want to bet go to Las Vegas, don’t go to the commodity exchanges”, he continued, adding that “there can be no doubt that the swapping of futures markets by the runners of casinos is having a deleterious effect on the world supply of commodities”. Better control of United States markets to rein in betting on commodity prices was the key to fixing that problem, he said. The Dodd–Frank Wall Street Reform and Consumer Protection Act, passed by the United States Congress in 2010, aimed to do just that through tighter controls that would protect consumers from abusive financial services practices. Moreover, the United States Federal Reserve was telling banks to get out of the markets and stay focused on traditional commercial banking. “There should be a banning of the casinos, which will have no productive harm to the economy and may shift half a trillion dollars into productive uses,” he said. Noting that Morgan Stanley was the largest holder of heating oil in the New England region of the United States, he said that should not be the case, stressing that markets should be returned to commercial users.

Mr. KERSTENS said there was a general consensus on the need for better market regulation and supervision in Europe. In 2003, institutional investors had €13 billion in commodities. That figure had expanded 15 times by 2008, and after falling in 2009, it had risen again in 2010, exceeding the 2008 levels. In October 2011, the European Commission had proposed steps to better regulate markets and financial instruments while reining in market abuses. Pending parliamentary approval, they would include increased pre-rate and post-rate transparency requirements for all standardized derivatives. Markets and investment firms would be required to publish prices, debt and investor interests, as well as information on volume and the times that transactions were executed. Derivatives would have to be traded on regulated markets instead of just over the counter, he said, adding that such steps would increase competition and facilitate price recovery while enabling greater market surveillance.

Moreover, regulated market and multinational trading facilities would have to publish weekly reports with aggregate data and provide a complete breakdown of their positions, he continued. Trading venues would be required to have position management and position limits, which would restrict the number of contracts into which a party could enter in a given period. Regulators would have uniform and European Union-wide powers to monitor and intervene when necessary, as well as the ability to impose limits on traders. Additionally, reforms would include the elimination of legislative exemptions, as well as new provisions on what constituted market abuse, he said. The market-abuse directive applicable to equities markets would be extended to include derivatives markets, and the financial and spot markets would be required to cooperate with the new rules.

Mr. TOZER said the world was entering an era of expensive commodities or volatile commodities, or both, using a chart of price volatility over the last 12 months to illustrate the return of prices to more containable levels. In the last two years, the threat of supply pushing out in soy, cotton and wheat had brought down the prices of those commodities, he said, noting that overall, the situation was much more complex than one of mere supply and demand, or mere financial speculation. Financial intermediaries were “very much needed” to hedge risk. Some of the most volatile days of the last year were those on which the market went down, not up, he said, noting that events like Japan’s tsunami and nuclear disaster had caused a dramatic fall in commodity prices.

Hedge and manage risk

The choppy nature of speculative flows made it very hard for real-world producers to hedge and manage risk, he said, pointing out that the economic cost of volatility increased uncertainty in the real economy. The critical issue of financialization was how to maintain the liquidity benefits of financial intermediaries while squeezing out excessive elements. At present, however, no one really knew the answer to that, and care must be taken to limit speculation. Financial investors were adjusting their behaviour, and several pension funds had pulled out of index products. Agriculture accounted for a relatively small part of indexes at JP Morgan and Goldman Sachs, he said, adding that in that area, it was important not to lose sight of the farmers, whose ability to farm and have access to credit was indispensable for food production and food security.

President FERNÁNDEZ said it could be difficult or complicated to propose policy options when there was no international consensus. Everyone agreed that there was a world food crisis due to rising demand for food that outpaced the increase in the world food supply. Climate change had also hindered world agricultural productivity, as had the use of corn, maize or sugarcane to produce biofuels. While several supporting and opposing arguments could be made about the latter, everyone agreed that there was a problem, which had been compounded by the financialization of basic foodstuffs, he said, noting that a historical understanding of such phenomena could be helpful.

The abruptness of the 2008 spike in food and commodity prices was particularly worrisome and had forced everyone to think in terms other than just supply and demand, he said, adding that geopolitical tensions were also a factor in price-setting. Food insecurity was a result of several basic environmental challenges, he said, citing poor soil quality and water shortages. There was a need to invest in research and development to spur agricultural productivity, he said, calling for the creation, in the short term, of mechanisms to ensure transparency on the markets and provide access to information. Applauding FAO’s AMIS, he wondered whether it had any connection to the futures markets, and whether an average person could access information on who was investing in what, thus enabling a clear understanding of what was driving price changes. Noting that dramatic increases in food and oil prices had led to social unrest, he stressed the vital need to address that through the right regulatory and information tools.

In the ensuing open discussion, representatives of Member States, civil society organizations and other stakeholders described measures to address excessive food-price volatility.

The representative of Algeria, speaking on behalf of the “Group of 77” developing countries and China, said the emerging trend of large investors acquiring massive tracts of farmland in developing countries for speculative purposes could add to the many challenges those nations already faced in ensuring food security for their populations.

The representative of Togo said her country had created a national food security agency to ensure the availability of basic foods and increase food production by local producers, among other goals. The representative of Argentina took issue with market-distorting protectionism.

The representative of the United Republic of Tanzania denounced profiteers who took advantage of globalization to generate wealth through sophisticated market mechanisms instead of investing in food production. Market fundamentalists were missing the point, or at least missing the distinction between price manipulation and excessive speculation when attempting to address those challenges, he pointed out. “If a big market player hoards a food commodity in a scarce market, that’s manipulation”, he said, stressing the need to establish an international regime to regulate excessive speculation in sensitive commodities, particularly food and oil.

The representative of Burkina Faso underscored the international community’s incapacity to address food shortages while the representative of China, noting that his country relied on domestic food production, proposed the promotion of agricultural production for self-sufficiency; strengthening market regulation, particularly restricting food from being used as a means to make profit; and international cooperation to stabilize food prices by concluding the World Trade Organization’s Doha Round of trade negotiations.

The representatives of Belize, Pakistan, Morocco, Burkina Faso and Germany also spoke, as did a representative of the Common Fund for Commodities.

Closing Remarks

President FERNÁNDEZ, concluding the debate, said that despite differences, all had agreed on the need to increase agricultural production, research and development, innovation and concern for climate change and connected factors. “We must consider the next steps to take,” he said, pointing to proposals to create mechanisms for transparency. Many forums were working on the issue of price volatility, such as the Secretary-General’s High-Level Task Force on the Global Food Security Crisis and the Committee on World Food Security, he said, adding that the creation of a permanent multidisciplinary working group would be a welcome additional step.

Assembly President AL-NASSER (Qatar), recapping the main issues highlighted during the day, recalled that panellists had reviewed the record of commodity price volatility and its impact on development and the world’s poorest and most vulnerable people. Among other points made were that food-price increases in the last few years had pushed more than 150 million people into hunger, raising the total number of under-nourished people on the planet to more than 1 billion for the first time in history. The panellists had also discussed the broader socio-economic impact of food-price volatility and its impact on the household incomes of the world’s poorest nations and peoples.

Noting that food-price increases in Latin America had accounted for 40 per cent of inflationary pressures, he said that combating them was consuming increasingly larger shares of national budgets. In Africa, the increases had made it impossible to achieve the first Millennium Development Goal of halving global hunger. There was broad agreement that addressing the causes and consequences of food-price volatility and food insecurity required a comprehensive approach that must include major new efforts to strengthen investment in agricultural production within developing countries, he said. However, more work was required to develop an understanding of the role of financial markets in increasing price volatility, raising uncertainty and preventing effective action.