The Food Crises: A quantitative model of food prices including speculators and ethanol conversion

Lagi, Marco; Bar-Yam, Yavni; Bertrand, Karla Z.; Bar‐Yam, Yaneer

doi:10.48550/arxiv.1109.4859

Cited by 8 publications

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“…In a paper published in September 2011, we constructed for the first time a dynamic model that quantitatively agreed with food prices [1]. The model was able to fit the FAO Food Price Index time series from January 2004 to March 2011, inclusive, and showed that the dominant causes of price increases during this period were investor speculation and ethanol conversion.…”

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confidence: 89%

“…FIG. 1: Food prices and model simulations -The FAO Food Price Index (blue solid line) [2], 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 (see [1], Appendix C) 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 (see [1], Appendices D and E). The green curve is the fit extended to the present with the original parameter values, the red curve is the fit with new optimized parameters.…”

Section: Caption) Parametersmentioning

confidence: 99%

“…Original parameters [1]: k sd = 0.098, k sp = 1.29, µ equity γ 0 = −0.095, µ bonds γ 0 = −67.9. New optimized parameters: k sd = 0.093, k sp = 1.27, µ equity γ 0 = −0.085, µ bonds γ 0 = −48.2.…”

Section: Caption) Parametersmentioning

confidence: 99%

“…The ability of our model to characterize the non-equilibrium behavior of markets is an important extension of economic analyses that have previously not been designed for this purpose (see Appendix A in [1]). The current trend of prices suggests that in the immediate future market prices may become lower than equilibrium, consistent with bubble and crash market oscillations.…”

Section: Caption) Parametersmentioning

confidence: 99%

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The Food Crises: A Quantitative Model of Food Prices Including Speculators and Ethanol Conversion

et al. 2011

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Increases in global food prices have led to widespread hunger and social unrest-and an imperative to understand their causes. In a previous paper published in September 2011, we constructed for the first time a dynamic model that quantitatively agreed with food prices. Specifically, the model fit the FAO Food Price Index time series from January 2004 to March 2011, inclusive. The results showed that the dominant causes of price increases during this period were investor speculation and ethanol conversion. The model included investor trend following as well as shifting

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confidence: 89%

Section: Caption) Parametersmentioning

confidence: 99%

Section: Caption) Parametersmentioning

confidence: 99%

Section: Caption) Parametersmentioning

confidence: 99%

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The Food Crises: A Quantitative Model of Food Prices Including Speculators and Ethanol Conversion

et al. 2011

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“…In earlier papers [7,[9][10][11][12][13] we have shown that high and spiking global food prices have triggered riots and revolutions, and warned that predicted future spikes in global food prices would lead to additional social unrest [7]. We constructed a quantitative model that identified the causes of the rises in global food prices to be biofuels, particularly the conversion of corn to ethanol in the U.S., and increased financial speculation in the agricultural commodities futures market [9].…”

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South African Riots: Repercussion of the Global Food Crisis and US Drought

Bar-Yam

Lagi

Bar‐Yam

2015

Conflict and Complexity

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High and volatile global food prices have led to food riots and played a critical role in triggering the Arab Spring revolutions in recent years. The severe drought in the US in the summer of 2012 led to a new increase in food prices. Through the fall, they remained at a threshold above which the riots and revolutions had predominantly occurred. Global prices at this level create conditions where an exacerbating local circumstance can trigger unrest. Global corn (maize) prices reached new highs, and countries that depend mostly on maize are more likely to experience high local food prices and associated pressures toward social unrest. Here we analyze the conditions in South Africa, which is a heavily maize-dependent country, and we find that consumer food indices have increased dramatically. Coinciding with the food price increases this summer, massive labor strikes in mining and agriculture have led to the greatest single incident of social violence since the fall of apartheid in 1994. Worker demands for dramatic pay increases reflect that their wages have not kept up with drastic increases in the prices of necessities, especially food. Without attention to the global food price situation, more incidents of food-based social instability are likely to arise.Other countries that have manifested food-related protests and riots in 2012 include Haiti (prior to the impact of Hurricane Sandy) and Argentina. Moreover, these cases of unrest are just the most visible symptom of widespread suffering of poor populations worldwide due to elevated food prices.Our analysis has shown that policy decisions that would directly impact food prices are decreasing the conversion of maize to ethanol in the US, and reimposing regulations on commodity futures markets to prevent excessive speculation, which we have shown causes bubbles and crashes in these markets. Absent such policy actions, governments and companies should track and mitigate the impact of high and volatile food prices on citizens and employees.

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Conflict in Yemen: From Ethnic Fighting to Food Riots

Gros

Gard-Murray

Bar‐Yam

2015

Conflict and Complexity

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Yemen is considered a global terrorist base for Al-Qaeda and in recent years rampant violence is threatening social order. Here we show that the socio-economic origins of violence recently changed.Prior to 2008, violence can be attributed to inter-group conflict between ethnically and religiously distinct groups. Starting in 2008, increasing global food prices triggered a new wave of violence that spread to the endemically poor southern region with demands for government change and economic concessions. This violence shares its origins with many other food riots and the more recent ArabSpring. The loss of social order and the opportunities for terror organizations can be best addressed by directly eliminating the causes of violence. Inter-group violence can be addressed by delineating within-country provinces for local autonomy of ethnic and religious groups. The impact of food prices can be alleviated by direct food price interventions, or by addressing the root causes of global food price increases in US policies that have promoted conversion of corn to ethanol and commodity speculation. Addressing the food prices is the most urgent concern as a new bubble in food prices has been projected to begin before the end of 2012.

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The Food Crises: A quantitative model of food prices including speculators and ethanol conversion

Cited by 8 publications

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The Food Crises: A Quantitative Model of Food Prices Including Speculators and Ethanol Conversion

The Food Crises: A Quantitative Model of Food Prices Including Speculators and Ethanol Conversion

South African Riots: Repercussion of the Global Food Crisis and US Drought

Conflict in Yemen: From Ethnic Fighting to Food Riots

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