How IFPRI’s Food Security Portal monitors food prices volatility: the "Excessive Food Price Variability Early Warning System"

Food excessive price volatility is a significant concern in developing countries, with potentially negative effects for both producers and consumers. Poor consumers spend a large share of their income on food; for example, according to a 2016 book published by the Center for Development Research (ZEF) and the International Food Policy Research Institute (IFPRI), low-income households in Tanzania spend more than 60 percent of their income on food purchases. This means that any sudden rise in prices can significantly deplete consumers’ household budgets. Poor producers, on the other hand, often have limited ability to time the sale of their products, meaning that they may have to sell their foods even when prices have unexpectedly dropped. This can reduce their incomes and lower their ability to invest in their farms. Clearly, both poor producers and poor consumers are vulnerable to sudden shifts in food prices.

Tracking and forecasting excessive food price volatility is thus an important channel through which to increase resilience and reduce poverty and food insecurity. At the meeting of the G20 Agricultural Ministers in 2011, the Agricultural Market Information System (AMIS) was created to provide better and timelier information on commodity supplies, prices, and trade in order to prevent and mitigate food excessive events of price volatility and price spikes like those seen in 2007-2008 and 2010-2011. To support the AMIS initiative, in 2011, researchers at IFPRI, in partnership  with the University of Colorado and West Virginia University, developed an innovative tool to track food price volatility. The Excessive Food Price Variability Early Warning System  provides a visual representation of periods of excessive global food price volatility from 2000-present for five staple commodities: hard wheat, soft wheat, soybeans, maize, and rice. The tool also provides a daily volatility status to alert users, particularly policymakers, when a particular commodity is experiencing excessive price volatility. This alert can help policymakers better understand what is occurring in the global market and determine appropriate country-level responses, such as the release of physical food stocks, to help protect their populations from unexpected price movements.

Excessive Food Price Variability Warning System

Beyond the understanding of how food prices are moving, the understanding of factors that may be driving those movements is equally fundamental. Price shocks can often result in overly reactive policies, such as export restrictions or bans, that are designed to protect domestic populations from the effects of those shocks; such policies, however, often end up exacerbating market volatility and creating a vicious cycle. For example, a recent study from IFPRI’s Malawi Strategy Support Program of maize and soybean export bans in Malawi found that the bans did not reduce domestic prices and in fact may have contributed to domestic price volatility.

Another innovative tool from the Food Security Portal looks at the role the global media plays in exacerbating or calming food price shocks and impacting overall food prices. The Food Security Media Analysis (FOMA) System, created in collaboration with Sophic Alliance Inc., uses sophisticated linguistic and semantic object network-mapping algorithms to track how global and regional media outlets are reporting on commodity prices and price movements and to analyze how that coverage relates to and may influence those movements. The tool allows users to examine the extent to which perceptions of the global food security situation, as presented by the media, align with the actual food security environment. This research supports the premise that a lack of accurate information regarding agricultural markets and global food stocks may contribute to driving food price volatility by encouraging policymakers to enact harmful, reactionary policies. The FOMA System can be used to track global price movements as well as regional movements and is featured on the Global portal, and the Africa south of the Sahara portal.

Innovative tools like the FOMA System and the Excessive Food Price Variability Early Warning System can be important factors in improving policymakers’ and researchers’ understanding of harmful food price movements. By reducing excessive, harmful food price volatility, the livelihoods and well-being of poor populations around the world can be protected and improved.