Food market volatility has yet to be understood: No definite proof that it is due to speculators

April 22, 2013 by Anthony King
Food market volatility has yet to be understood: No definite proof that it is due to speculators
Credit: Audrey Low

Riots, political instability and a spike in malnourishment cases blighted the years 2007 and 2008, particularly in developing countries. The cause was a sudden surge in global food prices, with rice eventually rising several hundred per cent as importing countries simply could not get enough of this basic foodstuff. Global food expert Christopher Gilbert now warns that we can never predict such spikes in advance. Yet, Europe needs to improve its policies in this area. Gilbert, a statistician at the University of Trento in Italy, believes that, five years on, there is very little real evidence that traders and speculators on food markets caused the volatility in agricultural commodities.

Were speculators just an available scapegoat for policy makers? What were the true causes of the dramatic price rises in ? "We still don't know yet what caused the sudden rises [in 2007-2008]. There has been conflicting assessments," says Alberto Garrido, professor of agricultural economics at the Polytechnic University of Madrid, Spain.

Possible causes include increased demand, rising oil prices and production costs, devaluation of the dollar, supply shocks from droughts, increasing speculation, a rise in biofuel planting, export bans or taxes and reduced stock-to-use ratios. Garrido is today coordinating a project called ULYSSES, which seeks to uncover the true causes of the spike in to help predict their occurrence and offer policy recommendations to the EU to mitigate their effects. "We will use more data, look at longer time series, include more information and better methods and assess what changes took place in the market," Garrido explains.

Any sudden rises in particularly affects countries in the developing world which are net food importers. "Europe is largely self-sufficient in food, so won't experience critical shortages," Gilbert predicts, "But Europe should be concerned about the rest of the world and especially countries where food comprises a large proportion of the household budget."

Experts also believe that the poorest in Europe are also likely to suffer. "The poorest have to increase the amount they spend on food to a much larger proportion of their income than an average family," Tim Benton, global food security expert at the University of Leeds in the UK, tells "Since 2007, the poorest 10% have had to increase their spending on food by nearly 50% more than the average household. So food price inflation does drive food poverty," he adds.

However, other factors influence the price of food too. "Market economies by their nature lead to fluctuations in prices," Benton explains, "But climate change and increasing competition for food and water are going to undermine our ability to produce as much food as the market would like. What we can do is build a more resilient agriculture that is less prone to fluctuations and manage land better."

For Gilbert, blame lies partly with European policy in agriculture. "European agricultural policy is largely based on the misconception that Europe has a food security problem. The current commissioner is not really interested in reform," he says. Besides, "the beneficiaries of European Union policy on agriculture don't want to hear discussions of what policy should be about."

The answers brought by the project from summer 2013 will be relevant for consumers in Europe and elsewhere. "Having a more predictable market will be of benefit to food processors, producers and consumers in developed and developing countries," Garrido concludes.

Explore further: Cost of eating going up because of supply, demand

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3 / 5 (6) Apr 22, 2013
When shilling for genetically modified foods, "science" devotees regularly prate that they will "end hunger". And genetically modified food has been successfully foisted unknown on the public for decades now. So why is food becoming so difficult for so many to get? Popular Science explained that many if not most food distributors are letting their genetically modified food largely just rot in containers. They use excuses like impractical costs of distribution and insurance, then let the food go bad, then claim a massive tax loss. And don't discount the New World Order using food as a pretext for destabilization and unrest that they will use to expand military intervention and installing of corporate friendly dictators. It's all a lie, claims of genetically modified food sending hunger, claims of genetically modified food being safe, claims that big business is anything but a gigantic crime ring.
3 / 5 (8) Apr 22, 2013
Market volatility is due to govt regulations.
2.6 / 5 (5) Apr 22, 2013
yeah... the poor are growing corn for alcohol...
last time i was in indonesia visiting family, they were denucing mountains and rice paddies to have several corn crops a year...

ever notice that the one thing these idiot researchers (and i work in research computing with them), are really good at is hiding the one out of many things that are the actual answer so they can feign they dont know so they can beg for more money from the public till?

link food to fuel, and any idiot other than a liberal idiot will realize starvation and huge inflation in food will happen (and of course, the side effect desired by all this since the guys doing it always do negatives promising good, is the slow starvation and extermination of humans they dont like... )
3 / 5 (4) Apr 22, 2013
We still don't know yet what caused the sudden rises [in 2007-2008]. There has been conflicting assessments,

Possible causes include increased food demand, rising oil prices and production costs, devaluation of the dollar, supply shocks from droughts, increasing speculation, a rise in biofuel planting, export bans or taxes and reduced stock-to-use ratios.

The origin of this policy goes back to 2005 when Congress set requirements of corn to be used for automotive fuel. In 2007, the Energy Independence and Security Act greatly increased those requirements to improve air quality and become more energy secure. Behind the scenes, however, corn and other agricultural lobbyists were promoting the mandate to create a larger market for corn. Using current numbers, this year's ethanol mandate would theoretically require 44% of this year's corn crop.....

[i used to love physorg, before the socialists started cutting comments to cheat debates]
2.6 / 5 (5) Apr 22, 2013
roughly 14% of the world's corn crop is being converted into ethanol in the U.S.

The mandate is set to top out in 2015 at 15 billion gallons.

Thousands of barrels of ethanol now sit in storage because there is not enough gasoline in the market to blend it with — and blends calling for a higher percentage of ethanol have yet to catch on widely in the marketplace.

Before the plant opened, Mr. Mutter, one of more than 300 investors in a company that owns a majority of the plant, used to sow about 300 acres of corn each year. Now he plants 2,500 acres.
3.7 / 5 (3) Apr 23, 2013
[i used to love physorg, before the socialists started cutting comments to cheat debates]

I don't understand your negative inference. Your argument is about how agri-corps are seeking to influence the government and thus earn more money off what they produce. From what I understand of socialism, it seems likely both you and socialists would be in agreement that this is not beneficial for the rest of us.
1 / 5 (1) Apr 23, 2013
When the price of grain raises 3-5% between the time the ship docks and the truck are loaded... I'd call that "speculation", more than "guberment regulation"
3.7 / 5 (6) Apr 23, 2013
Guy, what are you talking about?
" Thai government policy that pays local farmers vastly inflated prices for their rice. While the government sees the program as a way to boost rural incomes, the policy has made Thai rice uncompetitive against rice from Vietnam and India. Before the new policy went into effect, Uthai exported 200,000 tons to the U.S., China, and Hong Kong. This year, he says, "we will be lucky if we get 80,000.""
"Rather than sell the rice on the open market—and risk embarrassment as private dealers see the haircut the government is taking—Thailand is trying government-to-government deals that allow buyer and seller to keep prices secret."
Govts have nothing to do with food prices?
3.7 / 5 (6) Apr 23, 2013
"since the New Delhi government had banned overseas sales after a global shortage in 2008. The Indians lifted the ban in 2011. Since then, Indian rice has flooded the market. After a record year in 2012, Indian exports are likely to grow another 5 percent this year, according to a survey of estimates by Bloomberg. Thailand needs to cut "at least $100 [per metric ton] from the price they are quoting right now," says Samarendu Mohanty, head of the social sciences division at the International Rice Research Institute in Manila. "
3 / 5 (4) Apr 27, 2013
Using our limited, tillable soil to produce motor fuel is (to me) the epitome of stupidity.

Liquified natural gas is the gold mine waiting to be exploited.

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