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

Wildfires in Australia: Climate hazards and uncontrolled liberalization do not mix well

October 28, 2013

Massive brushfires are destroying Southern Australia. While droughts and wildfires are recurrent events, the situation is unprecedented in close to 50 years, due to an unusual drought and high temperatures. In 2009, a fire in the Southern State of Victoria claimed 173 casualties and burned down thousands of homes.

Many analysts argue that climate change might explain such uncommon weather, but the Government feels that not only global warming has nothing to do with the fires, but that the link might be a “complete hogwash,” said Australian Prime Minister Tony Abbott. For Canberra, another “hogwash” is the unstable nature of markets. A leader in The Cairns Group1, Australia is a staunch supporter of trade liberalization, and thus rules out any form of market intervention. Yet, beyond the adverse effects of climate change on Australian agriculture, the Government’s has overly developed an open policy that has worsened the state of an already ailing agribusiness industry: Reliance on low-priced imports from China in particular, disappearance of some sectors and price wars among large-scale retailers…

Internationally, while it is hard to claim that wildfires are one of the first massive signs of climate change, their impact on futures markets––especially European futures markets––was felt on October 23. Wheat prices rose in markets that were concerned about these historic fires that threatened crops. Consequently, speculation can progress based on the potential damages of the drought and its impact on price volatility, especially since the country is a significant wheat exporter, and has a decisive influence over global price setting.

Nonetheless, exogenous factors alone are not enough to explain price volatility without considering endogenous risks, i.e. the market internal inefficiencies. Accordingly, the effects of climate change do worsen price volatility, but the “climate” factor acts as a match that may inflame a situation already unbalanced by nature.

The ultimate irony is that Australia took over the presidency of the Agricultural Market Information System (AMIS) in early October, and as such, recommends letting markets fluctuate freely, and opposes France’s idea of implementing regulation reserves.

Yet, without any recognition of the detrimental results of unregulated liberalization, price volatility will only increase, since the gradual loss of the last regulatory mechanisms and the contraction of global reserves will heighten speculative behaviors and the effects generated by the various players’ forecasting errors.

1 The Cairns Group is a coalition of 19 exporting countries that, in spite of extensively supporting farming, advocates liberal positions and substantial cuts in agricultural subsidies due to their « alleged » distorting effects on international trade.
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Paris, 18 December 2018