How to rebuild confidence in food markets after this summer’s spike in wheat prices

Regularity and repetition you say? No; the lot of the farmer is always to have to deal with the vagaries of weather, pest, diseases. No two years are the same. And this is why the globalized food system you have so stridently promoted over the years is so deadly to farmers.

Here’s how it works: in the old days, if a farmer had a bad year, say his cabbage crop was damaged and his yield was down by 50%, he would be in trouble. But in such cases it is likely that his neighbours would be in a similar position, so that there would be a regional shortage. The law of supply and demand would cause the sale price to rise and the farmer recoups some of his loses.

Nowadays what happens? The farmer tells the supermarket that he wants to raise the price and they ignore him and import some from Morocco or wherever and make it clear that they are teaching him a lesson. And now you want to re-introduce buffer stocks (I bet The Economist cheered when they were abandoned years ago) to give the farmer another working over. Incredible!

The Economist is right about asserting “food trade needs some insurance against export bans” and that “the world would benefit from a global system of food stocks. These would give importing countries confidence that supplies will always be for sale when prices spike, calming panic buying and reducing pressure to retreat into self-sufficiency.”

Self sufficiency is indeed inefficient as a world wide system. But no sane nation is to give up voluntarily its food self sufficiency, unless above assertions are guaranteed beyond any reasonable doubt.

Perhaps it’s time to set up world wide stockpile of reserves for raining days under the sanction and unified management of some UN organization to ensure no price spiking or outright ban in case of need from any nation.

Until then you have to give extra credits to populous states like China, India, Indonesia, and Japan etc. for having a self sufficiency policy working, more or less, and thus help maintaining some stability of food stuff worldwide.

@Metformin

I am a farmer's son and I have raised cows for milk, cheese and meat, chickens for both for meat and eggs, pigs, sheep, goats, ducks, geese, guinea fowl and I have grown maize(corn), wheat, potatoes, soya beans, paprika, tomatoes, onions, market vegetables, flowers and planted lots of trees and harvested from established orchards. And we are definitely commercial farmers, but well run smal holdings within co-operatives can be really efficient and good for the land.

And yeah, mostly profitably but I can assure you not always.

Otter, if farming is as you describe, obviously it is outdated. Why in the world would you only have a farm in one place? Wouldn't it make more sense to diversify geographically? This would not work for individual farmers but then who are they kidding just trying to run one farm? In my country (america) farmers have largely become welfare whores, living from hand out to hand out. These hand outs come in the form of cash, tarrif and non-tarrif barriers to competition. All of these things raise food prices to the benefit of farmers only. Perhaps it is time to make farmers earn their money and not rip off american consumers. This may mean forming alliances with far flung farmers or perhaps farmers could use the derivitives market to hedge against uncertainty (like every other business.) I will not shed a tear when the economically unsophisticated farmers have to sell their farms to the ones smart enough to weather uncertainty and volatility. And on a final note, farmers are the main users of illegal workers in the US. They hardly seem very american, breaking the law and distorting free trade.

I dislike when authors write about climate change as if it is a recent phenomenon.

Climate change has been going on for millions of years. At times at a faster rate and greater impact than today. The volcanic winters of the great famine (1315-1317) from Kaharoa, Kuaynaputina in the 1600s,or Krakatoa (1883) alone caused far greater disruption then we've experienced recently. There have been hurricanes, tsunamis and all forms of natural disaster documented regularly through out recorded time causing blight, starvation and general misery.

Your arguments would be far more rigorous if you stayed off the trendy climate change bandwagon. Instead, try stating that as a fact of nature there is ALWAYS unpredictable change which results in market volatility. Please be more intellectual and less alarmist.

Self sufficiency for the food is definitely something every country has to aim unless it wants to invite future problems.
Economist is proposing something that is not applicable worldwide. Do you realy think any government elected in a democratic system (and thus under some sort of control by the society) will risk it's own survival and the welfare of it's citizens from reduced food supply (and on higher price) in order to feed some nation on the other side of the world that cannot control it's birth rate? Do you think any normal society will? I don't think so.
The population of each country must be made aware how many people it's land may support in terms of at least basic survival rations. My point is sooner or later some sort of birth control and planning need to be introduced worldwide - after that the proposed global system of food stocks may happen. Until then, harsh as it may sound, the food accessibility is the most effective natural deterent for uncontrolled population growth.

The Food Markets ate aysmettric especially in Price Amplification Scenarios. Inventories may look wonderful on Paper but their Availability is completely compromised in a Crisis such as being witnessed in Russia and previously in the Rice Markets. I will take the other side of the Bet because what between Climate Deniers [their Narrative Fallacy] and Each Countries Individual National Interest, getting Global Coordination looks like a Political Project not unlike Herding Cats.
Aly-Khan Satchu
www.rich.co.ke

Small farmers also need access to credit and some sucessful investors should are actively seeking means to particpate in 'Micro-Finance. The small holders of today could become the commercial farmers of tomorrow.

There also needs to be greater encouragement of co-operatives, so that many smallholders can interact with the markets as one large entity for the procurement of inputs, finance and insurance as well as for distribution of output.

And I would nominate the FAO - Food and Agricultural Organisation rather than WFP for the role the Economist proposes.

So if the U.S. and France for example lower their food import tarrifs to force their farmers to compete with farmers globally, their food supply then becomes dependent on the domestic policies of foreign nations.

Already the problems with energy supplies being dependent on foreign nations are evident and The Economist wants to extend this from energy to food? The UN Food Program will administer the global food stocks? I mean does any right thinking person still believe the UN can administer anything but an expensive global bureacracy characterised mainly by the immense sums of money it expends doing virtually nothing useful. You'll have Libya and Zimbabwe standing up at the UN vetoing food supplies to New Zealand, you'll have the Chinese proping up illegitimate governments to secure farm space and the U.S. manufacturing reasons to invade countries with arable farmland.

Step one is to protect your local food supply, and by extension that means your farmers, even if it involves subsidy - unless you want Robert Mugabe having a say in what you eat, when you eat it and how much you are going to pay for it.

Do we still believe in "efficient market hypothesis"?

Should we, after all, value efficiency above anything else in situations plagued by deep uncertainties and involving catastrophic downside risks?

Shouldn't we instead imitate Mother Nature who favors redundancy over efficiency?

Wasn't it the economists' ideas about efficiency that drove our World to become so interconnected that a failure in one place propagates throughout the whole system instead of staying confined locally and saving millions from being punished for other peoples' stupidity?

Wasn't it them who persuaded us to adopt the economic system that performs admirably most of the time, but when it fails, it does so catastrophically?

I, for one, no longer believe in anything that is coming from the mainstream economic thought.

I find engineers, physicists and biologists a much more interesting crowd to talk to these days, than... well, you know who.

Anyone commenting on this article and the author - is there a single person among us who ever grown a plant / animal for a profit? Just wondering.

Otter, isn't the problem you describe alleviated through the use of crop insurance and futures markets?

Self-sufficiency is not efficient for big food-chain markets and globalization...

I am from India and scenario here is different. The wheat and other food stuffs are decaying due to lack of storages.
Now this year we are suffering from worst flood. This damaged the riped crops in many states.
Another problem is wide spread corruption and lack of funds makes farmers to quite farming.

The today frmers are more behind their computer screen watching the stocks exchanges ! It's a pity, they don't like thieir work for itself, but for what it can bring money !

There will always be a need for some doses of Dalaic fuedal serfdom wisdom when a governing a large country like India with one-quarter of the world's starving people.

Manmohan opts for the poor to starve
By Raja Murthy

MUMBAI - Should unused food be allowed to go to waste or used to feed the hungry? An unprecedented "order" by India's Supreme Court to Agriculture Minister Sharad Pawar to distribute food grain free to the poor, instead of letting millions of tonnes of it rot, has blown up into a core issue, raising questions about about the balance of judiciary and government, and how should a government deal with abject poverty.

"I respectfully submit that the Supreme Court should not go into the realm of policy formulation," Prime Minister Manmohan Singh said on September 6, politely telling the court to keep away from what he perceived as exclusive governmental turf. "It is not possible in this country to give free food to all the poor people."

Manmohan, disappointingly, missed the point, or pointedly avoided it, during a 80-minute meeting with senior journalists at

his residence in New Delhi on Monday. The Supreme Court order of August 12 had directed the central government to ensure free distribution of only grain that would have otherwise rotted in godowns. The government was not asked to feed for free all the poor across the country, all year. Distribute the grain free as a "short-term measure", the court had said.

For decades, food wastage has been a serious problem in the country (see India outsources food-waste woes, Asia Times Online, July 21, 2010), with US$12.2 billion worth of agricultural produce allowed to rot due to inadequate government-owned facilities. It was time the referee stepped in.

"Give to the hungry poor instead of it [grains] going down the drain," a Supreme Court bench of Justices Dalveer Bhandari and Deepak Verma instructed, responding to public interest litigation on the issue filed by a New Delhi-based civil rights group, People's Union for Civil Liberties (PUCL).

Grow your own food.

That the Economist should advocate a government institution (multinational no less) to manage a buffer stock sounds like the musings of a naive. Since has any government interbention had the long term interests of the industry and the consumer as its guiding force and indeed how ca it possibly reconcile such diverging interests. Leave it to the market and not a bunch of morally corrupt politicians.

The idea of a globalised food stocks/ market is good but it definitely needs to be highly smart and efficient- unlike the management of national food stocks in developing countries such as India.in the name of national food security excessive amounts of grains are procured at much higher prices with much less storage spaces and dysfunctional public distribution system and a large amount of food is either eaten by rats or damaged by rains and other vagaries, and poor keep on starving. The country's Supreme Court has to direct the food Minister to provide free food to poor people.

The world should enter into the prposal global food stock and market once we are ready with a much robust and efficient storage, market and distribution system and not just based on the concept- which in itself is noble.

This article appears to be totally wrong, from beginning to end. The first step necessary to fix the farming industry is to get rid of family farmers all over the world. When people with low IQs are replaced by competent, efficient businessmen around the entire plenet, the farming industry will improve a hundredfold, and 99.999 percent of all the problems in farming will magically disapprear overnight. This is exactly the same situation seen in replacing cottage industry with real industry, craftsman guilds with real industry, bookkeepers with computers, and so on. The worst part of farming today is the farming family. Get rid of them and replace them with educated business managers, and you will remove virtually all the problems of agriculture in one fell swoop, like wizardry. The one simple, easy step of getting rid of the farming family would transform the entire world of food availability and production.