G20 and food price volatility

A new agricultural market information system (AMIS) is an initiative by the G20 to gather and disseminate more information on the production and inventory of grains and other foods around the world. Data will be received jointly from the FAO, international agencies and G20 countries and aggregated to provide a better overall supply picture on critical food markets. (This is similar to the JODI data (Joint Oil Data Initiative) started a few years ago.)

France has been the strongest advocate for this initiative in order to reduce price volatility and premiums associated with the uncertainty concerning what is the supply of different foods. There are wide differences in how information is collected and disseminated in food markets.

The USDA is especially good at providing detailed information on US production, but many countries hold stock information as almost state secrets. The uncertainty about what is the true production and inventories held around the world means that many buyers will purchase first and ask questions later. The result is panic buying that is rational given the uncertainty but in a more transparent market would not make any sense. Markets are more likely subject to speculative attacks when there are large information divergences. If this information gathering is successful, there should be a dampening of prices as the market gains a better understanding of the true supply picture. This will be welfare enhancing.

Whether speculator or hedger, the providing of more commodity information is good for the global economy.