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CAUSES OF THE CRISIS 9


Figure 2.2 Trends in real international prices of key cereals, 1960 to mid-2008


Price (U.S. dollars/metric ton) 1,600


Rice


1,200 1,400


1,000 800


600 400 200


0


Source: IMF (2009a). Notes:


Soybeans Wheat Maize


Data are deflated using the U.S. Bureau of Economic Analysis gross domestic product deflator. The 2008 data are for July.


various groups of interest (Table 2.1). Figure 2.3 focuses more on nominal short-term price data to more clearly delve into the timing of price changes in the current crisis. These three sets of data give rise to the basic facts outlined below.


Consistent with the above arguments, the first observation is that long- term trends may be relevant to an understanding of the current crisis. The price levels in mid-2008—when food prices peaked—are about as high as they were in the late 1970s or early 1980s in real terms (Figure 2.2). However, the nature of this crisis is not how expensive prices are relative to their historical trend, but how quickly they have risen, together with the related problem of behavioral adjustments by consumers and producers. Thus the first, and rather trivial, fact is that food export prices have risen very quickly. The rise in prices in the recent crisis is similarly sharp in percentage terms to the price shocks of 1972–74 crisis (Figure 2.2 and Table 2.1). In both crises, rice prices shot up the most (about 220 percent), but wheat prices rose steeply in 1974 (180 percent), and maize and soybeans both exhibited rapid price increases on the


1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008


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