Long-Term Drivers of Food Prices

By J. Baffes, A. Dennis. 2013

114 citations recorded by the source corpus.

It is becoming increasingly apparent that the post-2004, across-the-board, commodity price increases, which initially appeared to be a spike similar to the ones experienced during the early 1950s (Korean War) and the 1970s (oil crises), have a more permanent character. From 1997-2004 to 2005-12 nominal prices of energy, fertilizers, and precious metals tripled, metal prices went up by more than 150 percent, and most food prices doubled. Such price increases, especially in food commodities, not only fueled a debate on their key causes, but also alarmed government officials, leading to calls for coordinated policy actions. This paper examines the relative contribution of various sector and macroeconomic drivers to price changes of five food commodities (maize, wheat, rice, soybeans, and palm oil) by applying a reduced-form econometric model on 1960-2012 annual data. The drivers include stock-to-use ratios, crude oil and manufacturing prices, the United States dollar exchange rate, interest rate, and income. Based on long-run elasticity estimates (approximately -0.25 for the stock-to-use ratios, 0.25 for the oil price, -1.25 for the exchange rate, and much less for others), the paper estimates the contribution of these drivers to food price increases from 1997-2004 to 2005-12. It concludes that most of the price increases are accounted for by crude oil prices (more than 50 percent), followed by stock-to-use ratios and exchange rate movements, which are estimated at about 15 percent each. Crude oil prices mattered most during the recent boom period because they experienced the largest increase.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/b47bba0dbffa188b94784199dcb350c8ff2a11aa

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Citations in the corpus

Synchronous failure: the emerging causal architecture of global crisis (2015, background): “Rising oil prices in the 2000s then directly boosted the cost of food (Headey and Fan 2008, Baffes and Dennis 2013).”
Oil and food prices in Malaysia: a nonlinear ARDL analysis (2015, background): “By contrast, Baffes (2007), Harri et al. (2009), Chen et al. (2010), and most recently Baffes and Dennis (2013) all provide evidence indicating significant contribution of oil price to agricultural pricesb.”
Global Biofuels: Key to the Puzzle of Grain Market Behavior (2014, background): “But many other observers in important institutions with an interest in food—the World Bank (Baffes and Haniotis 2010; Baffes and Dennis 2013), the International Food Policy Research Institute (von Braun and Torero 2009), and the US Department of Agriculture (Trostle, Marti, Rosen, and Westcott…”
Global Oil Prices and Local Food Prices: Evidence from East Africa (2016, unknown): “In the ongoing debate over the causes of these price spikes, one prominent thread emphasizes the role of oil prices (Abbott et al. 2008, Headey and Fan 2008, Krugman 2008, Mitchell 2008, Rosegrant et al. 2008, Baffes and Dennis 2013, Wright 2014).”
Reconciling food security and bioenergy: priorities for action (2017, background): “First, many studies attribute the food price spikes in 2008 primarily to other factors such as oil prices, economic growth, currency exchange rates, and trade policies (e.g., Baffes & Dennis, 2013; Konandreas, 2012; HLPE, 2011; Foresight, 2011; Trostle et al., 2011; DEFRA, 2010).”
THE ROLE OF BIOFUELS IN FOOD COMMODITY PRICES VOLATILITY AND LAND USE (2017, background): “Literature analysis exploring the impacts of biofuel projects on food security has limitations because projects have not been examined in equal detail (Barrett et al., 2012). Biofuels policies led to a serious debate in 2007, when global grain prices reached an unprecedented level. The research of D”