World urged to adopt grain reserve

MONTREAL — A quarter century after the last attempt at an international grain reserve was ditched, a senior Canadian Foodgrains Bank official says it is time for governments to reconsider the idea.

Paul Hagerman, public policy director for the Winnipeg-based Canadian Foodgrains Bank, told a McGill University conference on global security Oct. 17 that food price volatility during the past four years has hurt farmers while increasing hunger and poverty.

“I don’t see it happening anytime soon, but I do think it is one possible answer to the price volatility issue,” he said.

“I think it is in everyone’s interest in the world from farmers to consumers to have stable food prices, and this is one possible solution.”

However, he said in an interview that there are many governance issues to be worked out before the idea could be agreed upon, designed and implemented: where would the grain be stored, who would pay for it and at what point would reserves be released to the market to stabilize prices?

“These are very complicated questions and there will be different sides, but I do think the debate should begin,” said Hagerman.

As he was making his pitch in Montreal, agriculture ministers were meeting at the United Nations’ Food and Agriculture Organization in Rome to discuss food price volatility and a proposal from France to consider creating a grain reserve.

The proposal did not get off the ground in the face of fierce opposition from the United States.

A grain reserve was part of successive International Wheat Agreement arrangements in the 1980s, with the U.S. mainly responsible for its maintenance and finance.

The Americans scrapped the reserve and released the grain as U.S. and European Union subsidy wars developed in the 1980s, helping to depress prices.

Hagerman said paying for reserve stocks and storage would be key areas for negotiation.

He estimated the cost at $200 to $400 million annually and argued that this would be a small price to pay for grain price stability, considering the cost of subsidies that go to other sectors, including biofuel production.

He presented a graph that showed price spikes have occurred in recent history when world stocks fell below 21 percent of consumption. Hagerman proposed that the 21 percent level could be a target level for the size of any future grain reserve.

Jean Lebel, vice-president of the International Development Research Centre, said in an interview grain reserves have proven themselves to be powerful food market stabilizers, despite all their complications.

“Whether it is price volatility or high food prices, it affects so many people and contributes to poverty and hunger,” he said.

“There are good examples of countries deciding to build food reserves. In history, it has proven that it works.”

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