Food Stocks and Price Volatility

The recent experience of three food price spikes in five years highlighted the vulnerability of international markets to supply and demand shocks when stock-to-use ratios are low. The resulting “excessive” price volatility was associated with lower stock levels that were not “adequate” to cushion the impact of shocks, although defining “excessive” and “adequate” is not easy and reliable stocks data are scarce. In the last few months, recovering production and stock levels have calmed markets.

These developments have focused analytical attention on the relationship between stocks and prices and on low stocks as a necessary condition for spiking prices. They have also revived interest in the question as to whether active manipulation of stocks at national, regional and even international levels might be used to stabilize prices or at least limit price spikes.

This paper reviews these issues in the light of the questions raised by the FAO Expert Meeting on Stocks, Markets and Stability held at FAO headquarters, Rome, 30-31 January 2014. The Committee is invited to consider the information presented herein and to discuss its policy implications.