The role of food prices in the Syrian crisis, and the way forward

October 27, 2015
The FAO Food Price Index (blue solid line), the ethanol supply and demand model (blue dashed line), where dominant supply shocks are due to the conversion of corn to ethanol so that price changes are proportional to ethanol production and the results of the speculator and ethanol model (green and red dotted lines), that adds speculator trend following and switching among investment markets, including commodities, equities and bonds. The green curve is fit till March 2011 (vertical blue bar), the red curve is fit till Jan 2012. Thus the matching of the former to data after March 2011 is an out of sample fit.

The disintegration of Syria and Europe's refugee crisis are only the latest tragic consequences of two spikes in food prices in 2007/08 and 2010/11 that triggered waves of global unrest, including the Arab Spring. Researchers at the New England Complex Systems Institute (NECSI) have traced these spikes and spiraling crises to their root causes: deregulated commodity markets, financial speculation, and a misguided U.S. corn-to-ethanol fuel policy that removes nearly 5 billion bushels of corn from markets each year. With world food prices currently in retreat, now is the time to changes policies.

In a paper published in the Proceedings of the National Academy of Sciences, NECSI researchers explain how the Arab Spring was triggered by sudden spikes in global . When food becomes scarce, desperate people riot. Riots destabilized Syria and other poor countries, testing governments and sometimes leading to their fall. Many causes for the rapid rises in food prices have been suggested, but NECSI quantitatively determined that speculation caused these sharp rises in price. Additionally, the mandated conversion of corn into ethanol was linked to a steadier rise in food prices that has a serious impact on hunger worldwide.

Remarkably, the paper uses fundamental physical methods, invented for and developed in statistical physics and science, to determine the implications of policies intended to alleviate world hunger. This paper also provides strong validation for the role of nontraditional behavioral agents in large deviations from equilibrium market prices. This is evidence that speculation and trend following causes bubbles and crashes, a long standing controversy in economic theory.

Physical methods can be used to identify the most important behavior-affecting factors in a complex system. In this case, they point to the role of speculators and ethanol in world food prices. The fitting of actual prices to theory has a p value of 10^{-60}, and the out of sample fit is as good as many theories' in-sample fit, p<0.001. This demonstrates the incredible accuracy that is possible for this kind of theoretical analysis of real world problems.

The ethanol mandates and the Commodities Futures Modernization Act of 2000, which allowed speculation in the commodities market, are both disastrous policy decisions that should be rolled back. However, as NECSI's president Yaneer Bar-Yam points out, "Because of large profits for speculators and agricultural interests, a very strong social and political effort is necessary to counter the deregulation of commodities and reverse the growth of ethanol production."

As NECSI has demonstrated, short-sighted market policies in the US sparked food riots, which triggered the Arab Spring, which destabilized Syria. The millions of internally displaced Syrians and migrants fleeing civil war and ISIS are just the latest event in a worldwide chain reaction. If nothing is done to restore stability, this will not be the last disaster.

Explore further: Scientists flag global food pricing too hot to ignore

More information: Marco Lagi et al. Accurate market price formation model with both supply-demand and trend-following for global food prices providing policy recommendations, Proceedings of the National Academy of Sciences (2015). DOI: 10.1073/pnas.1413108112

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12 comments

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Doug_Huffman
5 / 5 (8) Oct 27, 2015
The hazards of burning food for fuel!
antigoracle
3 / 5 (14) Oct 27, 2015
a misguided U.S. corn-to-ethanol fuel policy

The AGW Cult, saving the world, one "brilliant" idea after another.
antigoracle
2.2 / 5 (10) Oct 27, 2015
When food becomes scarce, desperate people riot. Riots destabilized Syria and other poor countries

The silence from the ignorant AGW Chicken Littles is deafening. What an obedient flock they choose to remain, head buried in sand, blissful in their ignorance. After Paris, it won't just be poor countries, but the poor in every country.
antigoracle
2.2 / 5 (10) Oct 28, 2015
Chicken Littles still got their brainless heads buried in sand?
antigoracle
2.3 / 5 (9) Oct 28, 2015
This is the AGW Cult, fulfilling their prophesy of doom and gloom.
jim_xanara
Oct 28, 2015
This comment has been removed by a moderator.
jljenkins
2 / 5 (4) Oct 28, 2015
This site just gets clasier every day.

Fine.

If you want an adjective that fits his behavior, which is "compensating for inadquacy" in the extreme, I suggest "needle dicked" is extremely likely to be spot on.
antigoracle
3.4 / 5 (5) Oct 28, 2015
You're the chicken little, you dog's cunt. Give your real name you fucking coward.

Yep and you've also given us the fact that you are a retarded asshole.
Now, why don't you boast a little more about your cesspool of a country that shat you out.
antigoracle
3.4 / 5 (5) Oct 29, 2015
Give your real name you fucking coward.

Go ask your wife, she screams it every time.
ryggesogn2
2.6 / 5 (5) Oct 29, 2015
The hazards of burning food for fuel!


The hazards of socialism.

This is great example of how socialism on one end, govt mandates and subsidies for ethanol and govt restriction on socialist states like Syria on the other lead to poverty and despair and tyranny.

SuperThunder
1.8 / 5 (5) Oct 29, 2015
All of these comments are nonsense.

I wont correct them though until phys.org cuts me in on the ad revenue they must be getting for becoming a rabid moon-howler portal. This is my Dr. Doolittle tax for having to wade through pure stupid to read a science site. Do the decent thing, phys.org, and shut down your comments section.
Noumenon
4 / 5 (4) Nov 07, 2015
All of these comments are nonsense.

I wont correct them though until phys.org cuts me in on the ad revenue they must be getting for becoming a rabid moon-howler portal. This is my Dr. Doolittle tax for having to wade through pure stupid to read a science site. Do the decent thing, phys.org, and shut down your comments section.


No one is forcing you to read them, and they are located at the bottom of the page well away from the article, ....so in fact you don't have to wade through them to read the article, do you. If your going to post nonsense yourself, you could at least try to be hilarious, like some above.

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