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LESSONS FOR THE FUTURE 95


there were concerns about declining stocks among some agricultural experts).3 Nevertheless, the fact that the 1972–74 crisis prompted policy interest in predict- ing and preventing future crises suggests that the failure to give early warning signals for the current crisis is rooted in methodological or institutional failings, or both. Essentially our conclusion is that food security organizations and agri- cultural researchers were caught between two extremes: tracking recent price developments on the one hand and predicting long-term swings on the other. GIEWS, for example, was set up in response to the lack of any forewarning to the 1972–74 crisis, so it might have been expected to have offered some early warning of the current crisis. However, Headey and Raszap Skorbiansky (2008) review GIEWS’s Food Outlook—a quarterly publication that deals with global food security issues—during 2005–07, yet find no evidence that GIEWS gave any early warning of an impending food crisis. This is partly because GIEWS has a strong mandate to focus on year-to-year food crises in individual countries and partly because publications like Food Outlook are not monitor- ing all necessary variables, such as oil prices, cereal futures prices, and U.S. dollar movements (the good news on this front is that such organizations as GIEWS, WFP, and FEWSNET have scaled up their efforts to collect and dis- seminate data on food prices). Interestingly, FAO (2008, 21) seems aware of this deficiency, and GIEWS has beefed up its monitoring of domestic food prices in the wake of the crisis. The other extreme is represented by sophisti- cated modeling exercises carried out by other sections of the FAO, IFPRI, and various other research institutions (see the review by McCalla and Revoredo 2001). What is needed is an intermediate approach that combines some of the rigor of a formal model with shorter term predictors of international prices, such as oil prices, exchange rates, futures market indexes, harvest informa- tion, and demand shocks (imports or biofuels).


Improving the Functioning of Markets and Trade


The international price increases can partly be explained by factors outside the food system (such as oil prices and U.S. dollar movements), but it is also likely that several key features of the global food system made the impacts of these exogenous factors all the more severe. First, the world currently relies on the grain reserves of just a few exporting countries to stabilize prices and ensure stable food supply. However, this arrangement has been informal since the failure of negotiations on food reserves after the 1972–74


3 Von Braun et al. (2005) raised concerns about rising food prices because of supply constraints, and other experts voiced concerns about declining stocks, but for the most part nobody expected the sharp surge in prices that ensued.


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