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Potential Market Effects of Selected Policy Options in Emerging Economies to Address Future Commodity Price Surges

Wyatt Thompson and Grégoire Tallard
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Wyatt Thompson: University of Missouri
Grégoire Tallard: OECD

No 35, OECD Food, Agriculture and Fisheries Papers from OECD Publishing

Abstract: This report examines the market outcomes of different policy options that could be adopted in the event of a future spike in the world price of wheat and rice. The three policies – additional border measures, consumer subsidies or public stocks – only partly mitigate the effect of a price spike on consumers in the implementing countries. However, taxpayer costs can be large, particularly for broad consumer subsidies or to build and carry grain stocks. Trade measures reduce domestic prices to producers, suppressing long-run supply response. There are also negative unintended consequences for international markets and market participants in other countries that trade on these markets. New consumer subsidies or trade measures introduced by some countries to offset rising international grain prices causes those prices to rise even more in other countries. Releasing public stocks eases tight markets and lowers prices in all markets, helping to reduce the price spike, but stock building and rebuilding phases mean higher market prices and less food consumption at other times. In conclusion, none of these policies is an unambiguous solution that sustains food consumption during times of high prices with minimal taxpayer and other costs.

Keywords: Commodity price spike; consumer subsidies; food security; public stocks; trade measures (search for similar items in EconPapers)
JEL-codes: J33 Q10 Q17 Q18 (search for similar items in EconPapers)
Date: 2010-10-14
New Economics Papers: this item is included in nep-agr
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