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Data at our fingertips, myths in our minds: recent grain price jumps as the ‘perfect storm’

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  • Wright, Brian D.
Abstract
The onset of the grain price spikes in late 2007 heralded a heated discussion among economists and policy makers on the source of the problem and appropriate policy responses. The subsequent rounds of price surges hit landless poor consumers hard, and transferred billions of dollars from them to landowners worldwide. Economists offered a list of highly plausible explanations for the recent jumps in grain price levels. Key findings included the large harvest shortfalls caused by climate change, energy prices, and fertilizer prices, as well as demand increases due to the large and persistent annual income increases in India and China. Several declared various combinations of the above factors to be a ‘perfect storm’ in grain markets. In fact little more than a quick series of online searches easily reveals that only the last is plausible as a major cause of recent grain price jumps. In particular there was no major global grain production shortfall. On the other hand biofuels mandates, relatively neglected in many studies, introduced a new source of grain demand that tightened markets and drove up prices. The disconnect between economic analysis and easily verified facts is a disturbing feature of recent economic analyses of grain markets.

Suggested Citation

  • Wright, Brian D., 2014. "Data at our fingertips, myths in our minds: recent grain price jumps as the ‘perfect storm’," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(4), October.
    • Handle: RePEc:ags:aareaj:280202
    DOI: 10.22004/ag.econ.280202
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    References listed on IDEAS

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    1. Brian Wright, 2014. "Global Biofuels: Key to the Puzzle of Grain Market Behavior," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 73-98, Winter.
    2. Zulauf, Carl & Rettig, Nick, 2013. "Comparing Current and 1970 Farm Prosperity: Alcohol for Fuel and the Current Prosperity," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 3, August.
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    6. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
    7. Wright, Brian, 2014. "Global Biofuels: Key to the Puzzle of Grain Market Behavior," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt11715438, Department of Agricultural & Resource Economics, UC Berkeley.
    8. Will Martin & Kym Anderson, 2012. "Export Restrictions and Price Insulation During Commodity Price Booms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 422-427.
    9. Zulauf, Carl & Rettig, Nick, 2013. "Comparing Current and 1970 Farm Prosperity: Cash Income and Real Estate," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 3, April.
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    11. Zulauf, Carl, 2013. "Comparing Current and 1970 Farm Prosperity: Cash Farm Expenses," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 3, May.
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    Cited by:

    1. Fabio Gaetano Santeramo & Emilia Lamonaca & Francesco Contò & Gianluca Nardone & Antonio Stasi, 2018. "Drivers of grain price volatility: a cursory critical review," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 64(8), pages 347-356.
    2. Chimaliro, Aubrey Victor, 2018. "Analysis of main determinants of soya bean price volatility in Malawi," Research Theses 334743, Collaborative Masters Program in Agricultural and Applied Economics.
    3. Kayode Ayankoya & Andre P. Calitz & Jean H. Greyling, 2016. "Real-Time Grain Commodities Price Predictions in South Africa: A Big Data and Neural Networks Approach," Agrekon, Taylor & Francis Journals, vol. 55(4), pages 483-508, October.

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