Achieving Food Security: A Key Element of Social Protection: How to Insure Against Price and Weather Instability

30 mai 2011 > 1 juin 2011, Paris

Conférence ABCDE 2011 - Session parallèle organisée par la Ferdi

With food prices again at a record high level and highly volatile, food security has become an issue of major concern for both the international community and national governments. At the Davos meeting, World Bank President Zoellick when asked what was, in his opinion, the biggest challenge facing the developing world in 2011 responded that it is “the risk of a big boost in food prices”, explaining that “when prices of staple foods soar, poor countries and poor people bear the brunt”. Rising food prices are also a major contributor to inflationary pressures in developing and emerging economies, threatening the sustainability of growth.

President Sarkozy selected as priority issue for his 2011 presidency of the G8 and G20 the issue of food security. The FAO along with several other international organizations responded by calling on international expertise to advise the world nations’ Committee on Food Security on ways of managing food price volatility and coordinating policy responses to food price shocks. The World Bank doubled its 2004 level of investment in agriculture to $8 billion, while the G8 and the Bill and Melinda Gates Foundation endowed a Global Agriculture and Food Security Program.

The BRIC countries are also stepping forward with their own aid programs: China and India are investing in natural resource industries including agriculture in Africa, Brazil has stepped up a technology transfer program to Africa, and Russia is in the process of establishing a Eurasian Center for Food Security as part of its G8 commitments. Private sector investments in agriculture have also boomed. UNCTAD reported a four fold increase in FDI in agricultural production following the food crisis.

In this context, Ferdi proposes a workshop that deals with the way to face food insecurity linked either to weather or to price instability. In this perspective, three eminent specialists, Prof. Alain de Janvry, Prof. Elisabeth Sadoulet and Prof. Alexander Sarris, will present their current investigations related to these two main issues.

Panélistes / Présentations

Présidence de session
Patrick Guillaumont
Président de la Ferdi,
Professeur émérite de l'Université d’Auvergne

A) New options to insure against weather instability
With accelerating climate change, weather shocks have become a major source of food insecurity, particularly among the rural poor. As stressed in the third report from the Climate Change, Agriculture and Food Security (“Agriculture, Food Security and Climate Change: Outlook for Knowledge, Tools and Action”, CCAFS ReportNo.3) , climate shocks have multiple effects linked to poverty and food insecurity, i.e. loss of productive assets, impaired health, destroyed infrastructure, etc. Climate instability hampers investments in improved agricultural technology and risks to intensify poverty and vulnerability. Risk management with regards to weather instability is consequently required to build resilience to future climate change thus decreasing vulnerability of rural poor.

"Achieving Food Security: How to Insure Against Weather Instability? Bridging the gap between promise and reality" Alain de Janvry, Vianney Dequiedt et Elisabeth Sadoulet

"Providing indexbased agricultural insurance to smallholders: Recent progress and future promise"
Alain de Janvry, Marshall Burke et Juan Quintero

Alain de Janvry,
Professeur à l'Université de Californie à Berkeley,
Senior Fellow à la Ferdi 

The question becomes then assess whether small farmers can be insured against weather shocks. Index-based weather insurance, as a new financial product, offers much promise, yet take-up has been disappointing without major subsidies. The presentation will explore other approaches, in particular through hybrid contracts where a marketing cooperative is insured on an index basis while incentive formulas are proposed for damage-based individual compensations within the group to promote collective action.

Various case studies will be taken as examples to support the discussion like the weather insurance project implemented by the People’s Insurance Company in China and subsidized by the Chinese government, the pilot system of an index-based weather insurance at the cooperative level launched in Guatemala or the re-insurance system developed in Mexico. On the basis of comparisons and lessons learnt from the various
programs, suggestions will be proposed to assist rural poor facing food insecurity associated with weather instability.

Besides tools aiming to face food insecurity associated with weather instability, the feasibility of new kinds of insurance against price instability will be examined.

B) Options for developing countries to deal with food commodity market volatility
Recent agricultural commodity market development suggests that market volatility is likely to be a permanent feature of world markets. Food insecurity may arise both from the instability of the international price of agricultural commodities exported by the low income countries and from the instability of food prices for low income net food importing countries. This raises the issue of how low income countries can manage this market instability.

Alexander Sarris,
Professeur à l'Université d'Athènes,
Senior Fellow à la Ferdi

"Options for Developing Countries to Deal with Global Food Commodity Market Volatility"

Dr. Maximo Torero,   Division Marchés, Commerce et Institutions

International Food Policy Research Institute (IFPRI)
"Options to reduce price volatility"

Many proposals have been made in the last two years or so in response to the 2007/08 food price spikes. They cover suggestions involving storage at the international or national level, the idea of virtual reserves etc.; suggestions implying gains in information and coordination of storage, market information, etc.; trade facilitation like protocols for international collaboration, export bans prevention or food import financing facility. These suggestions may to some extent be substitutes.

The presentation will thus review the problem of market instability as it affects low income developing countries and will discuss several policy options, some national and some international, to deal with the ensuing problems.