Think-Tank Creates Food Price-Volatility Detector

Anew statistical tool will help world leaders identify when food prices become dangerously volatile and help hunger fighters decide when to release food reserves to feed the poor, said a think-tank July 7.

The tool developed by the International Food Policy Research Institute (IFPRI) could answer two goals of agriculture ministers from the Group of 20 wealthy nations – it will make commodity markets easier to understand and help in design of a food safety net.

IFPRI said its tool will provide an early warning of excessive variability in food prices. Abnormal fluctuations in prices and returns usually are accompanied by lack of access to food by poor people. The IFPRI model tracks hard and soft wheat, corn and soybeans.

Some 925 million people are chronically hungry worldwide. A surge in grain and soybean prices pushed a global food price index to a record high in February. The index remains at near-record levels.

Meeting in late June, the G20 agriculture ministers agreed to gather data on food output and supplies to calm volatile prices. They also asked the World Food Program to develop a pilot program for small regional food stockpiles for emergency use.

IFPRI will help operate the Agricultural Market Information System, based at the UN Food and Agriculture Organization. IFPRI is part of the Consultative Group on International Agricultural Research, a network of research centres.

With its price volatility tool, IFPRI scans closing futures prices daily for variations that would occur with less than a five per cent probability. The results are grouped with the preceding 60 days to judge if there is a period of excessive volatility.

The information could allow government officials to look at supplies and decide whether to wait out a price spike.

The tool, a non-parametric extreme quantile model, “allows the data to really speak,” said Carlos Martins Filho, IFPRI senior research fellow. He said it was “fully flexible” and could be applied to other commodities.



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