Beneficial impacts of an international grain reserve on global food security

Highly volatile food prices on global markets challenge food security. Only in the last decade, two pronounced food price spikes severely affected vulnerable populations worldwide by increasing malnutrition and hunger. This has stirred up the debate upon the usefulness of an international grain reserve. Whereas advocates argue that it could damp damaging price extremes, opponents question its effectiveness and are concerned about associated market distortions and costs. However, to our knowledge, a comprehensive quantitative assessment is still missing. For this purpose, we introduce an agent-based dynamic multi-regional model that consistently accounts for intra-annual strategic as well as commercial storage holding. For the case of wheat, we first show that the model is able to reproduce historical world market prices (see Fig. 1(a)) and regional ending stocks (stocks see Fig.1(b) for global ending stocks) from 1980 to the present. Having a bi-annual timestep, the model enables us to single out the main drivers of past short-term price volatility: regional, mainly weather induced, production variations followed by trade policies as the second most important driver. The latter include, both, long-term stockholding management decisions as well as short-term regional political responses to scarcity situations such as export restrictions and restocking attempts. We then quantitatively model a strategic wheat reserve managed by an international body such as the UN. We discuss a management scheme for the reserve that aims at stabilizing prices within a price band by buying at low and selling at high prices (cf. Fig. 1). Importantly, in order to minimize market distortions, this scheme is not designed to damp out price volatility completely, but to merely avoid damaging price extremes. Thus, it preserves the incentive for producers to invest in agricultural development and it can only complement and not replace local efforts to increase the food system's resilience. Eventually, we compare the necessary size of such a reserve to present national reserves and discuss the related costs.