How market transparency can

contribute to a productive, sustainable

and resilient food system

Jonathan Brooks

Head of Agro-Food Trade and Markets

Division, Trade and Agriculture, OECD

Directorate-General for Agriculture and Rural Developmentand Joint Research Centre Workshop on Market transparency, Brussels 30-31 May 2018

• What is it?

– Market vs price transparency

• Why should we care about it?

– For private agents – to improve efficiency and equity

– For public policy: to guide policies that can foster a competitive, innovative, sustainable and resilient food system

• What can policymakers do to improve it?

– Disseminate publicly available information (observatories)

– Access to privately held data

Issues surrounding market transparency

• Transparency reflects the ease with which information is available – not just on prices, but also on production, trade, consumption and stocks, terms of contracts, structural data

• Agricultural markets are relatively transparent– Atomistic production, relatively homogenous

products, highly traded

• Food markets less so– Market concentration, heterogeneous products

• Information on agricultural markets is generally public, information on other links in the chain is mostly private

What is market transparency?

1. Improved price discovery can raise efficiency, dampen price volatility and reduce waste

2. It can redress unequal bargaining power that derives from asymmetric information

3. It can contribute to the identification of price collusion and other anti-competitive practices

Market benefits of improved price

transparency

These stem from imperfect competition along the food chain

• Rent transfers: e.g. from processors to retailers

• It could make price collusion easier

But these risks can be managed by qualifying the terms under which private data are made available

Basic aim should be for all markets to be competitive– conditions under which these concerns would dissipate

But there could be undesired effects

Objective Role of market information

Competitiveness Detection of unequal bargaining power and anti-competitive practices

Innovation (productivity growth)

Improved information can improve predictability and encourage investment

Sustainability Effects of pricing natural resources (and carbon) toreflect their social cost will affect market prices and outcomes. How?

Resilience The food system is subject to a wide range of risks, at the farm level and beyond. Market information can help in the design of risk management tools, and identify the role for government

Public health How do consumers determine their food choices? What can be done to encourage healthier food choices?

Market information is essential for the

design of effective public policies

7

So far the emphasis has been on collecting

price (and to a lesser extent cost) data

Monitoring of food prices and costs1

Level of detail

Cost

Basic national monitoring of consumer prices

Canada, Greece, Ireland, New Zealand, Norway, Poland,

Romania, Sweden, Turkey

More elaborate monitoring (geographical comparisons)

Australia, Czech Republic, Denmark, Estonia, Finland, Hungary, Israel, Japan,

Korea, Latvia, Mexico, Netherlands, Portugal, Slovenia, Switzerland, UK

Comparison of price changes at stages of the supply chain

Belgium, Chile, EU, Italy, Lithuania

Comparison of prices and costs at stages of the supply chainFrance, Spain, United States

Countries in red:Dedicated entity going beyond price data

Price analysis alone (decomposition of the food €, measures of retail to farm price transmission) cannot reveal whether markets are functioning competitively

But good market data (prices and quantities) are essential for effective analysis

Recent experience on the milk market demonstrates the problem

Dangers of false inference

Milk: Prices declined after end of quotas,

but production rose in Ireland and Benelux

Changes in milk production by

country, 2014 to 2015

EU dairy prices,

2010-2016

Milk: Yields in France and Italy relatively low,

but Italy commands a price premium

Milk yields of key EU dairy

producers, 2009 - 2015

Average payment for milk deliveries,

EU, France, Italy, 2009-2016

UKNL

DE

IT

EU-15

FR

EU-28

• Market transparency is vital for several reasons– Useful for private agents (e.g. price discovery)

– Also essential as a guide to public policies: fostering competition and innovation, ensuring sustainable resource use along the food chain, helping in the design of risk management tools, encouraging healthy food choices

• Data can be mis-used and mis-interpreted – but that is no reason not to collect data

• Need two tiers of information– Public information (observatories)

– Access to privately held information for purposes of policy analysis

Conclusion on the need for market

information

Beyond the farmgate (upstream and downstream) much of the necessary market data are privately held

– Need for discussion of how much data needs to be publicly available to for market participants

A much wider set of private data is needed for effective policy analysis

– Piecemeal access to those data is impeding the design of effective food and agricultural policies

– Need a discussion of how access can be improved while respecting aspects of confidentiality

– There is a mutual interest between the public and private sectors in the design of effective policies to support productivity, sustainability and resilience

The need for access to private data