Among the lessons learnt about the causes of the global food crisis of 2007/2008, the impact of ill-informed trade policy decisions and panic stricken commercial behaviour comes high on the list. Combined with prolonged drought, soaring oil prices and the rising demand for non-food uses of agricultural production, it established the conditions for the « perfect storm » to happen then.
As major importers of food products, especially cereals, Arab countries have a collective vested interest in working at reducing the risks of such trade shocks occurring in the future. We are currently living in a period of relative stability of cereal prices and should make the most of such quiet times to put together relevant mechanisms to prevent the storm to hit again.
Since 2014 the countries belonging to the International Centre for Advanced Mediterranean Agronomic Studies (CIHEAM) have attempted to build such a mechanism, with the aim of sharing information on cereal markets and progressively building confidence and trust among themselves.
Among the 13 CIHEAM countries figure major cereal importers like Egypt or Algeria and major exporters like France. Combined these countries represent a significant weight in the global cereal market. They collectively decided to build a network called MED-Amin devoted to sharing information on their respective national cereal markets. MED-Amin benefitted from the experience of its big sister, AMIS, launched by the G20 group after the 2007/2008 food crisis.
The cereal situation in the Mediterranean: A snapshot from CIHEAM’s MED-Amin network
In its first Policy Brief, the MED-Amin network provided its 13 member countries and associated decision-makers with some of key insights on the issues characterizing cereal markets in the Mediterranean area.
Mediterranean countries are confronted with strong natural constraints and upcoming difficulties resulting from climate change and growing pressure on water and land resources making cereal trade an absolute necessity for food security in the region. “Out of the 68 Mt of cereals consumed within the 5 CIHEAM southern Mediterranean countries, over 42 million - about 62% - are supplied from abroad (MED-Amin Figures).”
In a context characterized by heavy food consumption of cereals (about 200kg of bread per year and inhabitant in the NENA region) demographic growth is a challenge that cannot be resolved by production growth only.
To prevent instability and to enhance anticipated decision on cereal markets, quality information is essential on the evolution of production, consumption and stock levels. The timely transmission of this data to all involved actors requires multilateral cooperation and alignment at all levels within countries.
The approach chosen is to build forecasted annual cereal balances, matching the available quantities with the different uses of cereal.
Total Supply = production + imports + stocks at beginning of year
Total Utilization = consumption (direct and indirect) + exports + stocks at end of year.
The cereal balances implies that in a given year,
Total Supply = Total Utilization.
The trick is to be able to predict the values of variables on both sides of the balance before the year ends in order to anticipate possible disruptions.
This method, applied collectively and transparently among the member states of the network, opens wide avenues for information and methodological exchanges and confidence building among members. Anticipating production levels (yield x area) requires the combination of satellite imagery with plant growth modelling, and field checks. Monitoring stocks poses challenges by itself and calls for choosing the dates of the beginning of the year, not according to the civil calendar, but just before the harvest (the so called commercial year), so that stocks are minimal and errors in stock monitoring do not impact the balance too much. Anticipating consumption requires good statistical series and an understanding of consumer’s behaviour. The balance exercise should lead to accurate estimations of the needs for import at crucial moments of the year. The share of information from exporting countries allows importing countries to anticipate potential tensions on the market, and reversely for the exporting countries to predict whether their production has good chances of being sold easily or not.
Greater predictability is the best means of avoiding panic buying at periods of high price rises or hurried decisions to close borders and stop exports in the hope of maintaining reasonable levels of internal prices, when the real situation does not call for such drastic and destabilising decisions.
Sharing information on national cereal balances requires confidence and trust. It is a long process, but should not take too long because the next « perfect storm » might be waiting just around the corner.
