UPDATE February 2012 - The Food Crises: Predictive validation of a quantitative model of food prices including speculators and ethanol conversion
AbstractIncreases 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 between commodities, equities and bonds to take advantage of increased expected returns. Here, we extend the food prices model to January 2012, without modifying the model but simply continuing its dynamics. The agreement is still precise, validating both the descriptive and predictive abilities of the analysis. Policy actions are needed to avoid a third speculative bubble that would cause prices to rise above recent peaks by the end of 2012.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1203.1313.
Date of creation: Mar 2012
Date of revision: Mar 2012
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Web page: http://arxiv.org/
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