The importance of food reserves in a hungry world

The issue of globally-managed food reserves is receiving increased attention from policymakers in light of the food price crisis. But will the current proposals help achieve food security, or do we need a new framework to discuss their implementation? 

Link to a report that includes this article in a compendium of analysis: Grain Reserves and the Food Price Crisis: Selected Writings from 2008-2012, published by IATP, July 16, 2012

Although the issue of food stocks doesn’t feature so prominently in popular media commentaries on the global food crisis, grain reserves could play a key role in moving towards food sovereignty, and in achieving food security on an international basis. Following the recent spikes in agricultural commodity prices, the issue of reserves has received increased attention from policymakers, and at the first G8 Agricultural Minister’s Meeting in April 2009 a commitment was made to further examine options on global grain reserves, or what they termed “a coordinated approach to stock management.” The issue is now clearly on the international agenda, but despite a variety of different proposals being made for globally-managed food stocks, there are still some very different views on how such a system could function either to help achieve food security, or to help stabilise markets.

To give some brief background, the history of food reserves is an interesting one especially in the United States. During the 1930s depression, the New Deal farm policy instituted the nation’s first program of farm support not to feed a hungry nation, but to manage the surpluses of food that was being produced. To deal with the problem facing farmers of collapsing prices due to overproduction, a loan system was established for farmers who could store food in a reserve when market prices were low. This was a way of preventing cheap grain from flooding the market, and supporting the prices that farmers received. It wasn’t until the world food crisis of 1972-4 that these supply management tools were progressively dismantled, and the system of subsidies was inaugurated in the Nixon era. 

At this time, grain reserves were a key part of the discussions at the World Food Summit of 1974, and a Committee on World Food Security was established in the mid 1970s with the function of evaluating the adequacy of food stocks worldwide. Although they determined a minimum safe level of world cereal stocks, their proposals were never implemented. Instead, with the shift to market liberalisation policies from the 1980s onwards, many governments in developing countries were persuaded to sell off their public-sector grain reserves and inventories. Even in recent years, the IMF has continued to encourage the dismantling of state-managed food reserves in less developed countries. This process has gone hand in hand with so-called ‘cheap food policy’, or what’s been dubbed the ‘low-price-all-out-production-policy’ in agriculture that has been adopted by most governments and characterised the past few decades.

The situation today is that we now face one of the tightest margins in recent history between food reserves and global demand, with global reserves estimated to be at their lowest level in 25 years. When food prices soared on international markets last year, decades of trade liberalisation has meant that governments were unable to intervene in the market to regulate prices and supply, while at the same time many developing countries no longer had sufficient productive capacity to meet domestic demand. To compound this situation, they were also left without sufficient reserves as backup. In response, despite the widespread rebukes against “protectionist measures”, many governments are now building back up their reserves in an attempt to safeguard national food security.

The food price crisis has therefore underlined both the tragedy inherent in an overreliance upon market forces and the private sector in managing agriculture, and also the importance of government intervention through supply management policies. For this reason, re-establishing food reserves would go a long way to preventing a repeat of last year’s food crisis. Whichever way you look at it, whether it’s from a social or humanitarian perspective, from a political viewpoint or in terms of basic economics, the case for having domestic food reserves is incontrovertible.

What isn’t so clear is how a global system of food reserves could or should function. As with traditional grain reserves, their role could be broadly two-fold; on one level global reserves could regulate international commodity markets, and on another level they can be used to cope with emergencies on a global basis.

The case for a global reserve to be used for emergency responses and humanitarian assistance, managed independently by a UN agency like the World Food Program, has been proposed for many years by various NGOs. It’s argued that this could both prevent the need for the long and bureaucratic process of appealing for contributions at times of emergencies which can hinder the most effective international response; and it could also prevent humanitarian agencies like the World Food Program from needing to buy grains from the international market. As we saw last year, the WFP was being priced out of the market just like the millions of hungry people for whom it was trying to provide emergency food aid.

There are also various proposals for how a global food reserve could be used to make the free market in agricultural commodities function more smoothly. This could involve a virtual reserve or a financial fund, as in one recent proposal by the International Food Policy Research Institute, in which billions of dollars could be mobilised to intervene in the market when prices rise above a designated price band, in order to execute a number of short sells in futures markets around the world. This is proposed as one way of mitigating price shocks and reducing speculative commodity trade, and is one reason why the G8 countries and the World Food Programme, amongst others, have expressed an interest in this idea.

However, none of this addresses some of the deeper problems in agriculture such as the values inherent in a system that prioritises the export of staple foods for profit, or the concentration of market power in the hands of agribusiness, or the unequal access to resources for small-holder farmers and the poor. If we dare to envision a truly sustainable agriculture in which localised production and consumption is prioritised first, in which agro-ecological methods of production are the norm, and in which smallholder or family farming is the predominant means of producing staple foods, then the role of food reserves on a global scale could be quite different.

If staple foods are removed from international trade agreements, if they are protected from commodity speculation altogether, and if they are protected on a domestic level through appropriate government policies, then there would be less need for international supply management – at least in terms of protecting these essential staple food items. The main role then for global food reserves would be to ensure that basic needs are met in times of a food security crisis wherever it happens in the world.

Right now, the question of global food reserves is being discussed in the wrong context, and perhaps with the wrong outcome in mind. The G8 countries are investigating global stocks in order to prop up and perpetuate a system of free trade in staple agricultural goods – a system that has already removed all protection from price shocks for the poorest people, that has already dismantled those agricultural support policies that are crucial to the survival of sustainable small-scale farmers, and that continues to prioritise the private sector over policies that would benefit the growing number of the world’s hungry.

The context in which we should discuss the creation of an international network of food reserves should be as part of a new multilateral framework that facilitates self-sufficiency in staple food production at the local and national levels, and that supports smallholder and family farms. We could also consider the question of global food reserves in the context of the goal to progressively replace structural food aid by support to local agriculture.

In the end, providing adequate food for a billion hungry is not a stock issue, and it is not ideal to consider using reserves as part of an ongoing global welfare system. However, food reserves and international supply management policies could play a pivotal role in maintaining price stability for staple foods as a transition towards food sovereignty is made. To achieve this, it’s also clear that such a system of reserves needs to be managed by a politically independent global institution, ideally under the auspices of the United Nations.

Fortunately, we are not without a precedent for how to frame a discussion on these issues of protecting domestic staple food production, reducing the volatility of commodity markets, and promoting sustainable food systems over the long term. In the mid- to late-1990s, the Institute of Agriculture and Trade Policy (IATP) organised support for a Global Food Security Convention that was signed up to by 1,200 organisations from 80 countries. One reason that an international convention on food security (or even better, on food sovereignty) still seems like such a good idea is precisely because it provides the right context for discussing these questions of international supply management and global food reserves. Not only could it potentially elevate food security to the highest level of priority within international policy, but it could also set the necessary guidelines for governments to follow in pursuing the development policies necessary to eradicate poverty, achieve food security, and to create sustainable food systems.