World Grain - March 2010 - 7

from the editor-in-chief

Trade disruption interferes
with market signals

ost participants in international
gatherings devoted to finding ways
to provide global "food security"
agree on the need to step up investing in
infrastructure and research to assure that
crop production is adequate to the needs
of the expected mid-century population of
9 billion. Focus has been on finding ways
to boost outturns that are not dependent on
expanding cultivated land or on increased
use of water since both are rare resources
being utilized to their realistic maximums.
Governmental expenditures on the order of
$20 billion and more have been suggested as
the minimum needed to undertake studies of
how to achieve the 70% expansion of crop
production required not just to maintain current consumption for an expanding population but to meet growth in per capita intakes
as incomes improve.
Expansion in agricultural research funding, as important as it may be, must also be
seen as just one part of the effort to expand
food production. Omitted all too often in discussions devoted to "food security" issues is
another matter meriting equal attention. That
is allowing markets to operate with minimal
governmental interference. The aim is to be
sure that markets provide realistic signals to
farmers as to what is required. As simple and
as logical as this part of the "food security"
equation is, it is often missing when concerns arise over malnutrition.

WORLD GRAIN.
Chairman
Charles Sosland
Publisher/Managing Director Mark Cornwell
Director of Advertising Sales
Dan Flavin
EDITORIAL STAFF
Editor-in-Chief
Editor
Managing Editor,
World-Grain.com Editor
Markets
European Editor
Designer

Morton I. Sosland
Arvin Donley
Meyer Sosland
Melissa Alexander
Chris Lyddon
Ryan Alcantara

One of the most disappointing aspects of
the explosion in world grain prices in 2008
was the way this episode triggered multiple
intrusions by governments into how markets
work. These missteps occurred in both exporting countries that sought to protect domestic supplies and thus cut off signals to
their growers as to global needs, and among
importing countries that sought to restrain
consumption as well as to maintain tight
trade controls. Much attention has been directed to nations with sufficient resources
that have moved to acquire land for growing
crops in countries with favorable climates.
In too many cases, self-sufficiency was
proclaimed as a newfound domestic goal in
countries where growing conditions make
such an approach foolishly expensive and
unproductive.
Because rice is often the primary food in
developing nations, in contrast with how
wheat competes with many foods for its role
in the diet, some of the most destructive market interference has occurred in those nations
where rice is central to the food supply. In
the wake of recent wide swings in global rice
prices, it seems right to blame this volatility
on unpredictable government policies. Thailand, which normally is a leading exporter
of rice, has seen its government engage in
massive purchases, cutting supplies available for sale and releasing stocks in sporadic
fashion. India's government has changed its

rice export policies numerous times ahead of
imposing an outright ban on exports. Vietnam
sharply limited exports in 2008 and then aggressively encouraged shipments in the past
year. Egypt's export controls have been described as "ever changing," while Burma and
Cambodia have moved in and out of aggressive marketing. All of this results in the nonfragrant rice trade being described as "quite
confusing." Demand on the part of importers
has been consistent in reaction to these moves,
but importers do express great frustration.
Rice provides a strong case for not interfering with markets. It is likely that the
export limits imposed to restrain domestic
prices have in the end prompted much of the
strength in recent months. This is so even
though the share of global consumption accounted for by trade is lower for rice, at 6%,
than for other grains. By comparison, 10%
to 12% of coarse grain consumption moves
in world trade and wheat's share from trade
is 19% to 22%.
Recent experience emphasizes why interference with exports and imports, and thus
with functioning markets, may have undesirable consequences, including the disruption
of signals to producers. This is so even when
trade appears to account for a minimal share
of consumption.

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WORLD GRAIN (ISSN 0745-8991) Volume 28, issue 3,
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Morton I. Sosland
Editor-in-chief

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