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Food price volatility and farmers' production decisions under imperfect information

Author

Listed:
  • Anais Maillet
Abstract
Among other factors, food markets volatility has been explained by variations in production originating either in exogenous shocks affecting crops or in errors in anticipations due to non-rational expectations. We propose an alternative source of variations based on acreage decisions from rational farmers subject to imperfect information on shocks. Depending on the type of shock, more precise information does not necessarily reduce food price volatility. With a shock on input prices for example, the price is only indirectly affected by the shock through aggregate supply. In that case better information increases production and price volatility. However if the price is also directly affected by the shock then the effect of information can be reversed. With a global production or demand shock, we show that more information reduces price volatility, which implies that forecasts about climate, pests, diets, biofuel policies, etc. can help preventing excessive food price variations.

Suggested Citation

  • Anais Maillet, 2015. "Food price volatility and farmers' production decisions under imperfect information," FOODSECURE Technical papers 8, LEI Wageningen UR.
    • Handle: RePEc:fsc:fstech:8
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    File URL: http://www3.lei.wur.nl/FoodSecurePublications/TP8_maillet.pdf
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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