Global Uncertainty and the Volatility of Agricultural Commodities Prices

Abstract

This volume contains seven chapters, plus an introduction, by authors based in Europe and North America. It results from a workshop organised in Paris in June 2009 by the Momagri think tank and the Sorbonne's Business School. All contributions fit comfortably under the book's title, although they address quite a broad range of questions arising from the recent episode of unprecedented price volatility in global commodity markets. In fact, only two of the chapters aim explicitly to identify causes of recent commodity price volatility by a direct appeal to scientific evidence. A further two chapters consider how the current generation of global models used to simulate world commodity markets could be expanded or supplemented in order to generate price fluctuations of the magnitude recently observed. These four chapters are discussed in more detail below. The remaining three chapters, which are among the most interesting in the book, look at policy issues arising more particularly for developing countries from commodity price volatility. Of these, the chapters by Lustig and Dawe consider measures (including subsidies, trade restrictions and long-term forward contracting by governments) for stabilising domestic prices of food staples. The chapter by Guriev, Plekhanov and Sonin reviews evidence on whether heavy reliance on commodity exports (as a share of total export revenue or – in extreme cases – also for their contribution to total GDP) hinders or stimulates a country's economic growth, and how these effects are compounded by high commodity price volatility. The focus here is specifically on four central Asian economies (including Russia) that are major energy exporters, and several other transition economies in the same region with strong reliance on mineral exports. Diversification, sovereign wealth funds, development of the domestic financial sector and improvements in income distribution are among the policy initiatives discussed.