Accurate market price formation model with both supply-demand and trend-following for global food prices providing policy recommendations.

ABSTRACT: Recent increases in basic food prices are severely affecting vulnerable populations worldwide. Proposed causes such as shortages of grain due to adverse weather, increasing meat consumption in China and India, conversion of corn to ethanol in the United States, and investor speculation on commodity markets lead to widely differing implications for policy. A lack of clarity about which factors are responsible reinforces policy inaction. Here, for the first time to our knowledge, we construct a dynamic model that quantitatively agrees with food prices. The results show that the dominant causes of price increases are investor speculation and ethanol conversion. Models that just treat supply and demand are not consistent with the actual price dynamics. The two sharp peaks in 2007/2008 and 2010

SUBMITTER: Lagi M 

PROVIDER: S-EPMC4653135 | biostudies-literature | 2015 Nov

REPOSITORIES: biostudies-literature