After several decades of quiescence, global commodity prices almost doubled in 2008 and, after a brief fall, rose again in 2011. Over the longer term, the impact of population growth on demand, and of climate change on supply, makes it likely that commodity prices will continue to be an important issue on the global policy agenda. The discussion begins with a simple, but important observation – much of the attention and debate has focused on commodity prices, but what people care about are food prices. The two are not the same, for several reasons. First, the costs of agricultural commodity inputs make up only a fraction – usually 20% to 30% – of retail food prices, and so one would not necessarily expect them to move in tandem. But more important is the sequence of what Steve McCorriston, one of the contributors to this volume, calls ‘a complex sequence of successively oligopolistic markets’ that lie between the agricultural commodities traded on world markets and the retail prices of the foodstuffs these commodities are used to produce. It is this sequence of ‘vertically integrated’ markets, each of them far from the textbook model of perfect competition, that forms the heart of this eReport.
Global monetary conditions have often been cited as a driving factor of commodity prices. This paper investigates the empirical relationship between US monetary policy and commodity prices by means of a standard VAR system, commonly used in analysing the e§ects of monetary policy shocks. The results suggest that expansionary US monetary policy shocks drove up the broad commodity price index and all of its components. While these effects are significant, they however do not appear to be overwhelmingly large. This finding is also confirmed under di§erent identification strategies for the monetary policy shock.
Agriculture in the 21st century faces multiple challenges: it has to produce more food and fibre to feed a growing population with a smaller rural labour force, more feedstocks for a potentially huge bioenergy market, contribute to overall development in the many agriculture-dependent developing countries, adopt more efficient and sustainable production methods and adapt to climate change. While the role of agriculture as a driver of overall growth would diminish over time along with its share in GDP, the experience of today’s middle income countries suggests that its role in poverty and hunger reduction would continue to be significant. Agriculture’s contribution to hunger reduction consists not just in producing food where needs are most pronounced, but also in creating employment, generating income and supporting rural livelihoods. Poverty reduction requires investments in a number of different areas. These include: 1) investments in sectors strongly linked to agricultural productivity growth, such as rural infrastructure (roads, ports, power, storage and irrigation systems); 2) investments in institutions and the broader enabling environment for farmers (research and extension services, land tenure systems, veterinary and food safety control systems, insurance and risk management); and 3) non-agricultural investment to bring about positive impacts on human wellbeing, including targeted food safety nets, social programmes and cash transfers to the most needy.
Food price variations can be very costly when they abrupt and unanticipated. In the current new era of market uncertainty, monitoring food prices become highly important to foresee any potential crisis. This study proposes an alternative approach in monitoring food price movements in many different markets within a country by focusing only on the key markets. Using monthly retail rice prices from the 25 major markets in Indonesia, we identify the key markets whose price movements can help to forecast price movements in all other markets. The key markets are identified using granger causality tests conducted in the vector error correction model framework. The relevance of monitoring the key markets in detecting price crisis is tested using Probit and Poisson models. We found that albeit not all of alert phases lead to crises, monitoring the key markets can help to forecast price movements in all markets across the country.
This paper is a re-make of Chapters 1-3 of the Interim Report World Agriculture: towards 2030/2050 (FAO, 2006). In addition, this new paper includes a Chapter 4 on production factors (land, water, yields, fertilizers). Revised and more recent data have been used as basis for the new projections, as follows: (a) updated historical data from the Food Balance Sheets 1961-2007 as of June 2010; (b) undernourishment estimates from The State of Food Insecurity in the World 2010 (SOFI) and related new parameters (CVs, minimum daily energy requirements) are used in the projections; (c) new population data and projections from the UN World Population Prospects - Revision of 2008; (d) new GDP data and projections from the World Bank; (e) a new base year of 2005/2007 (the previous edition used the base year 1999/2001); (f) updated estimates of land resources from the new evaluation of the Global Agro-ecological Zones (GAEZ) study of FAO and IIASA. Estimates of land under forest and in protected areas from the GAEZ are taken into account and excluded from the estimates of land areas suitable for crop production into which agriculture could expand in the future; (g) updated estimates of existing irrigation, renewable water resources and potentials for irrigation expansion; and (h) changes in the text as required by the new historical data and projections. Like the interim report, this re-make does not include projections for the Fisheries and Forestry sectors. Calories from fish are, however, included, in the food consumption projections, along with those from other commodities (e.g. spices) not analysed individually. The projections presented reflect the magnitudes and trajectories we estimate the major food and agriculture variables may assume in the future; they are not meant to reflect how these variables may be required to evolve in the future in order to achieve some normative objective, e.g. ensure food security for all, eliminate undernourishment or reduce it to any given desired level, or avoid food overconsumption leading to obesity and related Non-communicable Diseases.
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