The role of inventory adjustments in quantifying factors causing food price inflation
The food commodity price increases beginning in 2001 and culminating in the food crisis of 2007/08 reflected a combination of several factors, including economic growth, biofuel expansion, exchange rate fluctuations, and energy price inflation. To quantify these influences, the authors developed an empirical model that also included crop inventory adjustments. The study shows that, if inventory effects are not taken into account, the impacts of the various factors on food commodity price inflation would be overestimated. If the analysis ignores crop inventory adjustments, it indicates that prices of corn, soybean, rapeseed, rice, and wheat would have been, respectively, 42, 38, 52, and 45 percent lower than the corresponding observed prices in 2007. If inventories are properly taken into account, the contributions of the above mentioned factors to those commodity prices are 36, 26, 26, and 35 percent, respectively. Those four factors, taken together, explain 70 percent of the price increase for corn, 55 percent for soybean, 54 percent for wheat, and 47 percent for rice during the 2001-2007 period. Other factors, such as speculation, trade policy, and weather shocks, which are not included in the analysis, might be responsible for the remaining contribution to the food commodity price increases.
|Date of creation:||01 Aug 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Subramanian, S. & Deaton, A., 1994.
"The Demand for Food and Calories,"
175, Princeton, Woodrow Wilson School - Development Studies.
- Baffes, John & Haniotis, Tassos, 2010. "Placing the 2006/08 commodity price boom into perspective," Policy Research Working Paper Series 5371, The World Bank.
- Yang, Hong & Zhou, Yuan & Liu, Junguo, 2009. "Land and water requirements of biofuel and implications for food supply and the environment in China," Energy Policy, Elsevier, vol. 37(5), pages 1876-1885, May.
- Baka, Jennifer & Roland-Holst, David, 2009. "Food or fuel? What European farmers can contribute to Europe's transport energy requirements and the Doha Round," Energy Policy, Elsevier, vol. 37(7), pages 2505-2513, July.
- Hochman, Gal & Sexton, Steven E. & Zilberman, David D., 2010.
"The economics of trade, biofuel, and the environment,"
CUDARE Working Paper Series
1100, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Hochman, Gal & Sexton, Steven & Zilberman, David D., 2010. "The Economics of Trade, Biofuel, and the Environment," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5h03r349, Department of Agricultural & Resource Economics, UC Berkeley.
- Rafael E. de Hoyos & Denis Medvedev, 2011.
"Poverty Effects of Higher Food Prices: A Global Perspective,"
Review of Development Economics,
Wiley Blackwell, vol. 15(3), pages 387-402, 08.
- De Hoyos, Rafael E. & Medvedev, Denis, 2009. "Poverty effects of higher food prices : a global perspective," Policy Research Working Paper Series 4887, The World Bank.
- Joachim von Braun, 2008.
"Rising Food Prices: What Should Be Done?,"
The Agricultural Economics Society, vol. 7(SpecialIs), pages 30-35, 08.
- repec:cup:cbooks:9780521326162 is not listed on IDEAS
- Trostle, Ronald, 2008. "Fluctuating Food Commodity Prices: A Complex Issue With No Easy Answers," Amber Waves, United States Department of Agriculture, Economic Research Service, November.
- Thomas W. Hertel, 1999.
"Applied General Equilibrium Analysis of Agricultural and Resource Policies,"
GTAP Working Papers
297, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Hertel, Thomas W., 2002. "Applied general equilibrium analysis of agricultural and resource policies," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 26, pages 1373-1419 Elsevier.
- Rajagopal, Deepak & Zilberman, David, 2008. "Environmental, Economic and Policy Aspects of Biofuels," Foundations and Trends(R) in Microeconomics, now publishers, vol. 4(5), pages 353-468, October.
- Mabiso, Athur & Weatherspoon, Dave D., 2008. "Fuel and Food Tradeoffs: A Preliminary Analysis of South African Food Consumption Patterns," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6126, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Birur, Dileep & Hertel, Thomas & Tyner, Wally, 2008. "Impact of Biofuel Production on World Agricultural Markets: A Computable General Equilibrium Analysis," GTAP Working Papers 2413, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Kelvin Balcombe & George Rapsomanikis, 2008. "Bayesian Estimation and Selection of Nonlinear Vector Error Correction Models: The Case of the Sugar-Ethanol-Oil Nexus in Brazil," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 658-668.
- Zilberman, David & Hochman, Gal & Kaplan, Scott & Kim, Eunice, 2014. "Political Economy of Biofuel," Choices, Agricultural and Applied Economics Association, vol. 29(1).
- Hochman Gal & Sexton Steven E & Zilberman David D, 2008. "The Economics of Biofuel Policy and Biotechnology," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(2), pages 1-24, December.
- Bhattacharyya, Subhes C., 1996. "Applied general equilibrium models for energy studies: a survey," Energy Economics, Elsevier, vol. 18(3), pages 145-164, July.
- Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
- Ivanic, Maros & Martin, William J., 2010. "Promoting global agricultural growth and poverty reduction," 114th Seminar, April 15-16, 2010, Berlin, Germany 61098, European Association of Agricultural Economists.
- Alexandre Gohin, 2008. "Impacts of the European Biofuel Policy on the Farm Sector: A General Equilibrium Assessment," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(4), pages 623-641.
- Keith Fuglie & David Schimmelpfennig, 2010. "Introduction to the special issue on agricultural productivity growth: a closer look at large, developing countries," Journal of Productivity Analysis, Springer, vol. 33(3), pages 169-172, June.
- Alston, Julian M. & Pardey, Philip G. & Roseboom, Johannes, 1998. "Financing agricultural research: International investment patterns and policy perspectives," World Development, Elsevier, vol. 26(6), pages 1057-1071, June.
- Goldemberg, José & Guardabassi, Patricia, 2009. "Are biofuels a feasible option?," Energy Policy, Elsevier, vol. 37(1), pages 10-14, January.
- Peters, May & Langley, Suchada V. & Westcott, Paul C., 2009. "Agricultural Commodity Price Spikes in the 1970s and 1990s: Valuable Lessons for Today," Amber Waves, United States Department of Agriculture, Economic Research Service, March.
- Trostle, Ronald, 2008. "Factors Contributing to Recent Increases in Food Commodity Prices (PowerPoint)," Seminars 43902, USDA Economists Group.
- Alejandro Nin-Pratt & Bingxin Yu & Shenggen Fan, 2010. "Comparisons of agricultural productivity growth in China and India," Journal of Productivity Analysis, Springer, vol. 33(3), pages 209-223, June.
- Dixon, Peter B. & Parmenter, B.R., 1996. "Computable general equilibrium modelling for policy analysis and forecasting," Handbook of Computational Economics, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 1, pages 3-85 Elsevier.
- Chantal Nielsen & Kym Anderson, 2001. "Global market effects of alternative European responses to genetically modified organisms," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 137(2), pages 320-346, June.
- Gal Hochman & Deepak Rajagopal & David Zilberman, 2010. "Are Biofuels the Culprit? OPEC, Food, and Fuel," American Economic Review, American Economic Association, vol. 100(2), pages 183-87, May.
- Jean-Marc Burniaux & John P. Martin & Giuseppe Nicoletti & Joaquim Oliveira Martins, 1992. "The Costs of Reducing CO2 Emissions: A Technical Manual," OECD Economics Department Working Papers 115, OECD Publishing.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5744. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.