SUMMARY xiii


(two years since the peak of food prices in April–May 2008). Many academic reviews link problems that existed before the food crisis to the rise in prices, without providing compelling evidence of causal linkages. Many are also gen- erally based on preliminary evidence only or often use piecemeal approaches rather than comprehensive ones. Indeed, the more one assesses this crisis, the more one concludes that it is the result of a complex set of interacting factors rather than any single factor.


Despite this complexity, the assessment presented here suggests that some explanations still hold up much better than others. This set of inter- connected factors includes rising energy prices, the depreciation of the U.S. dollar, low interest rates, and investment portfolio adjustments in favor of commodities. All these factors are related to a range of underlying global macroeconomic phenomena that affected both food and nonfood commodi- ties. As for agriculture, specifically, energy prices are a significant supply cost in cereal production, but rising energy revenues also fueled increased cereal demand from energy-exporting nations. However, a major effect of rising energy prices was the consequent surge in demand for biofuels. Demand for biofuels had a stronger effect on maize than on other biofuel crops (such as oilseeds), although knock-on effects for other food items may have been sub- stantial (especially for soybeans). Interestingly, we also find that the surge in U.S. maize production for biofuels was of an order-of-magnitude equivalent to the primary explanation of the 1972–74 crisis—the surge in U.S. wheat exports to the Soviet bloc.


The surge in rice prices stands apart as being almost entirely a bubble phe- nomenon. The late and rapid rise in rice prices, almost all of which took place in the first few months of 2008, was closely related to the export restrictions of several major international producers and to large precautionary imports from major international consumers. These shocks compounded the existing volatility in rice prices that arises from the relatively thin international trade in rice. Export restrictions were also important for wheat markets, although these were partly triggered by weather shocks to wheat production, espe- cially in the case of Ukraine. The Australian drought was also a significant short-term factor, especially as southern hemisphere exporters like Australia and Argentina (who restricted wheat exports) provide counterseasonal wheat supplies to northern hemisphere countries.


In contrast to other assessments, we do not attribute much of a role to other factors cited in the literature, by politicians, or by the popular press. Many people cite surging demand from China and India, including the shift in their diets toward more meat consumption, and hence greater demand for feed cereals. This research theme was prominent prior to, and independent of, the 2008 food crisis, and it was brought up again as the crisis unfolded,


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