A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
A look at the news

The “intrinsic failure” of agricultural markets:
An irrefutable evidence

December 3, 2012


An event for leading grain traders, the 10th annual Global Grain Conference was held in Geneva between November 13 and 15. Dan Basse, President of the American agricultural consultancy firm AgrRessource, spoke on the significance of “market failures” to explain the discrepancy observed in some geographical areas between grain domestic prices and global prices.

According to Dan Basse, some major grain exporting countries are currently experiencing rising domestic prices that are higher than, or antagonistic to, global prices. In global market-driven nations, low reserves would force local consumers to pay higher prices for grain in order to secure supply.

Beyond the recorded dichotomy between domestic and global prices for some agricultural commodities, the official identification of agricultural market “failures” by experts provides a telling measure of their specific and strategic nature.

Specific, because in a deregulation context, the growing financialization of agricultural markets has been accompanied by the runaway development of market speculation, whose magnifying effects are genuine and problematic. Agricultural markets thus became complex anticipatory markets, where the players’ “psychology”1 is now one of the key factors explaining agricultural price volatility. Let’s not forget Russia’s and Ukraine’s August 2010 ban on grain exports following an unprecedented drought and heat wave. As a reaction to such announcements, markets spiraled out of control and generated increased agricultural price volatility that had no real connection to physical fundamentals.

Strategic, because agriculture has become not only a power challenge in the international arena, but also an essential guarantee of food security, which now cannot be dissociated from the status of international agricultural markets and of farmers. Consequently, net food importing countries are the first to report such dependency.

In light of these observations, it is crucial to renovate the “classical” analysis of agricultural markets that has been prevailing for several decades––from simple “fundamentals” relating to supply and demand––to incorporate new and potentially destabilizing factors, such as speculation in futures markets, especially OTC markets. The use of new simulation models––such as the momagri model––that include the multiple risks now facing agricultural markets is therefore indispensable.

At the same time, it is imperative to implement regulatory measures and a pertinent regulatory and institutional framework to prevent agricultural and food crises, and resolve them in the best possible manner. Because in the long run, all farmers and consumers worldwide will be threatened, if we do not implement such provisions.

1 The term players’ psychology means the many buying and selling behaviors of players––farmers, buyers, investors and governments––who also evolve over time according to the nature and scope of recorded market turmoil, and more generally the economic and institutional environment.
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Paris, 18 December 2018