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Rethinking the global food crisis


  • Headey, Derek D.


From 2003 to their peak in mid 2008, the nominal prices of maize and wheat roughly doubled, while those of rice tripled in a matter of months rather than years. Although fundamental factors were clearly responsible for shifting the world to a higher equilibrium price during this time, there is little doubt that when food prices peaked in June 2008, they soared well above the new equilibrium price. Numerous arguments have been proposed to explain overshooting, including financial speculation, depreciation of the United States (U.S.) dollar, low interest rates, and reductions in grain stocks. However, observations that international rice prices surged in response to export restrictions by India and Vietnam suggested that trade-related factors could be an important basis for overshooting, especially given the very tangible link between export volumes and export prices. In this paper, we revisit the trade story by closely examining monthly data from the largest export markets for rice (Thailand), wheat, maize and soybeans (the United States). In each case, we find that large surges in export volumes preceded the price surges. The presence of these demand surges, together with back-of-the-envelope estimates of their price impacts, suggest that trade events played a much larger and more pervasive role than previously thought. This further implies that improving the international grain markets should be a central focus of the international policy agenda going forward.

Suggested Citation

  • Headey, Derek D., 2010. "Rethinking the global food crisis," IFPRI discussion papers 958, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:958

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    References listed on IDEAS

    1. Beintema, Nienke M. & Pardey, Philip G. & Roseboom, Johannes, 1998. "Educating agricultural researchers: a review of the role of African universities," EPTD discussion papers 36, International Food Policy Research Institute (IFPRI).
    2. Gert-Jan Stads & Nienke M. Beintema, 2009. "Public Agricultural Research in Latin America and the Caribbean: Investment and Capacity Trends," IDB Publications (Working Papers) 33378, Inter-American Development Bank.
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    Cited by:

    1. Brockhaus, Jan & Kalkuhl, Matthias, 2015. "Grain emergency reserve cooperation – A theoretical analysis of benefits from a common emergency reserve," 2015 Conference, August 9-14, 2015, Milan, Italy 212767, International Association of Agricultural Economists.
    2. Michele Ruta & Anthony J. Venables, 2012. "International Trade in Natural Resources: Practice and Policy," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 331-352, August.
    3. Rutten, Martine & Shutes, Lindsay & Meijerink, Gerdien, 2013. "Sit down at the ball game: How trade barriers make the world less food secure," Food Policy, Elsevier, vol. 38(C), pages 1-10.
    4. Headey, Derek, 2011. "Was the Global Food Crisis Really a Crisis?: Simulations versus Self-Reporting," Research briefs 17, International Food Policy Research Institute (IFPRI).
    5. Antoine Bouët & David Laborde Debucquet, 2012. "Food crisis and export taxation: the cost of non-cooperative trade policies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(1), pages 209-233, April.
    6. Bischoff, Johanna, 2010. "Spekulation mit Nahrungsmittelprodukten als Ursache für Welternährungskrisen: Untersuchung am Beispiel des Reismarktes
      [Speculation with food products as a reason for global food crises: Analysis u
      ," MPRA Paper 38023, University Library of Munich, Germany.
    7. Brockhaus, Jan & Kalkuhl, Matthias & Kozicka, Marta, 2016. "What Drives India’s Rice Stocks? Empirical Evidence," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235659, Agricultural and Applied Economics Association.
    8. Baiphethi, Mompati N. & Viljoen, Machiel F. & Kundhlande, Godfrey & Ralehlolo, N.G., 2010. "Enhancing food and livelihood security in the context of the food and financial crisis: challenges and opportunities for small scale rainwater harvesting and conservation," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96640, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).

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    equilibrium price; export markets; export prices; export restrictions; export volumes; international grain trade; panic purchases; world food crisis;

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