By holding speculative investments in food and the conduct of market players largely responsible for the abnormal rise in food prices in the first half of 2008, the International Food Policy Research Institute has added a fresh dimension to discussion of last year's global food crisis.

The widely held notion that supply constraints, coupled with protectionist policies (read export bans) in several food-surplus countries, including India, were the prime causes of the problem has virtually been discounted by this global food policy think tank.

But while apportioning a good part of the blame to market failures, Ifpri has not put futures trading in food commodities per se in the dock.

This, in a way, confirms the findings of the Abhijit Sen committee, which went into the role played by futures trading in causing the agricultural price rise in India and came across no conclusive evidence to link this mode of trading with the price spiral.

However, the heavy flow of speculative capital from financial investors (who saw better returns here than in either stocks of financial securities) into agricultural product markets can and did serve to jack up prices in 2008. However indirectly, therefore, the futures trading market does not emerge unscathed from the study.

So how does the world prevent such price shocks in the future? The question is a vital one, given the impact that food prices have on the poor, and the risk of political turmoil if matters get out of hand -- as happened last year in several countries that witnessed food riots.

At home, India too has had a taste of speculation-driven price aberrations in the commodity exchanges though only in relatively insignificant items, such as guar gum and zeera (cumin seed).

The staple grains were not affected because of government interventions in the grain market and controls on the food trade. The measures included open-ended procurement at pre-determined prices, curbs on imports and exports, and the arranging of adequate supply through the public distribution system.

But some of these steps have now led to the accumulation of mammoth grain stocks with the government, in excess of buffer stocking requirements, and resulted in the blockage of funds in food stocks and the food management infrastructure. Governments can and do take such measures, since they have a political mandate. But would such a system work at the global level, when it is not clear who will pick up the tab if things go wrong?

The question becomes relevant because Ifpri's preferred solution to the problem seems to be an intelligent variant of what India has sought to practise domestically: market interventions and buffer stocking. To be sure, Ifpri recommends only a small buffer stock for meeting emergency situations, and it wants market interventions to be based on specific price signals and market intelligence.

These sound good in a study, but the difficulties in implementation are obvious. For a start, there will have to be a new body created for such a purpose, and many people will shudder at the prospect of another international bureaucracy. For another, such suggestions were made in the heyday of Third Worldism in the 1970s, for less important crops, and the idea never made much headway.

One obvious contradiction lies in the conflict of interest between buyers and sellers; whose interest should the new agency serve? And if futures markets are to be left untouched, and there is no one to control speculative money, the possibility of a small operation being overwhelmed by market forces is ever present.