Safeguarding food security in volatile global markets (web)

619 Pages·2011·9.74 MB·English

SAFEGUARDING Food SECURITY
In VoLATILE GLOBAL MARKETS
EdITEd bY
AdAm PrAkAsh

Safeguarding food security in
volatile global markets
Edited by Adam Prakash
FoodandAgricultureOrganizationoftheUnitedNations,Rome,2011
The designations employed and the presentation of material in this information
product do not imply the expression of any opinion whatsoever on the part
of the Food and Agriculture Organization of the United Nations (FAO) concerning the
legal or development status of any country, territory, city or area or of its authorities,
or concerning the delimitation of its frontiers or boundaries. The mention of specific
companies or products of manufacturers, whether or not these have been patented, does
not imply that these have been endorsed or recommended by FAO in preference to
others of a similar nature that are not mentioned.
The views expressed in this information product are those of the author(s) and
do not necessarily reflect the views of FAO.
ISBN 978-92-5-106803-8
All rights reserved. FAO encourages reproduction and dissemination of material in this
information product. Non-commercial uses will be authorized free of charge, upon
request. Reproduction for resale or other commercial purposes, including educational
purposes, may incur fees. Applications for permission to reproduce or disseminate FAO
copyright materials, and all other queries concerning rights and licences, should be
addressed by e-mail to [email protected] or to the Chief, Publishing Policy and
Support Branch, Office of Knowledge Exchange, Research and Extension, FAO,
Viale delle Terme di Caracalla, 00153 Rome, Italy.
© FAO 2011
Cover design by Giancarlo de Pol
Cover photo (centre) ©FAO/Ami Vitale
Typesetting and layout by River Valley Technologies (river-valley.com)
Contents
Preface xiii
Foreword xv
Overview xvii
I SETTINGTHESTAGE 1
1 Whyvolatilitymatters
—AdamPrakash 3
2 Commodityprices:theoreticalandempiricalproperties
—MatthieuStigler 27
3 Risingvulnerabilityintheglobalfoodsystem:beyondmarketfundamentals
—AdamPrakashandChristopherL.Gilbert 45
4 Risingvulnerabilityintheglobalfoodsystem:environmentalpressuresandclimatechange
—GlobalPerspectivesUnit(FAO)andNaturalResourcesDepartment(FAO) 67
5 Thenatureanddeterminantsofvolatilityinagriculturalprices:anempiricalstudy
—KelvinBalcombe 89
6 Emerginglinkagesbetweenpricevolatilitiesinenergyandagriculturalmarkets
—StefanBusse,BernhardBrümmerandRicoIhle 111
7 Grainspricepass-through,2005-09
—ChristopherL.Gilbert 127
8 Pricetransmissionandvolatilityspilloversinfoodmarkets
—GeorgeRapsomanikis 149
II WHYANEWPOLICYDIALOGUEISNEEDED 169
9 Theworldricemarketin2007-08
—DavidDaweandTomSlayton 171
10 Countryresponsestoturmoilinglobalfoodmarkets
—MulatDemeke,GuendalinaPangrazioandMaterneMaetz 183
11 Internationalcommodityagreements
—ChristopherL.Gilbert 211
SAFEGUARDINGFOODSECURITYINVOLATILEGLOBALMARKETS v
12 Thefallacyofpriceinterventions:anoteonpricebandsandmanagedtariffs
—BrianWrightandAdamPrakash 241
III INFORMATION,EXPECTATIONSANDTHEROLEOFSTOCKS 253
13 Theriseofcommodityspeculation:fromvillainoustovenerable
—AnnBerg 255
14 Theeconomicsofinformationandbehaviourinexplainingexcessvolatility
—AdamPrakashandMatthieuStigler 281
15 Storagearbitrageandcommoditypricevolatility
—CarloCafiero,EugenioBobenriethandJuanBobenrieth 301
16 Theroleoflowstocksingeneratingvolatilityandpanic
—MatthieuStiglerandAdamPrakash 327
IV GLOBALGOVERNANCETOWARDSFOODSECURITY 343
17 Globalgovernance:internationalpolicyconsiderations
—PanosKonandreas 345
18 Copingwithfoodpricesurges
—ChristopherL.GilbertandAlexandraTabova 377
19 Usingfuturesandoptionstomanagepricevolatilityinfoodimports:theory
—AlexanderSarris,PieroConfortiandAdamPrakash 403
20 Usingriskmanagementtoolstomanagepricevolatilityinfoodimports:practice
—MorganStanleyCommoditiesGroup 421
21 Theglobalgraincontract:towardsanewfoodsecurityinstrument
—AnnBerg 447
22 Strengtheningglobalfoodmarketmonitoring
—JimGreenfieldandAbdolrezaAbbassian 459
23 Addressingthebiofuelsproblem:foodsecurityoptionsforagriculturalfeedstocks
—BrianWright 479
24 Targetingthemostvulnerable:implementingsocialsafetynets
—ZoltanTiba 491
25 Targetingthemostvulnerable:implementingemergencyreservesandotherfoodsecurity
instruments
—AgriculturalSupportSystemsDivision(FAO) 509
26 Targetingthemostvulnerable:implementinginputsubsidies
—ZoltanTiba 529
27 Investingtowardsaworldfreeofhunger:loweringvulnerabilityandenhancingresilience
—JosefSchmidhuberandJelleBruinsma 543
Index 571
vi SAFEGUARDINGFOODSECURITYINVOLATILEGLOBALMARKETS
Tables
3.1 Thresholdvectorerrorcorrectionmodel:results . . . . . . . . . . . . . . . . . . . . . . . 53
4.1 Totalarableland:dataandprojections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
4.2 Globalassessmentofhuman-inducedsoildegradation(GLASOD) . . . . . . . . . . . . 71
4.3 Annualrenewablewaterresourcesandirrigationwaterwithdrawal:dataandprojections 72
4.4 Climatechangescenarioimpactsonfoodprices . . . . . . . . . . . . . . . . . . . . . . . 80
5.1 Dataseriessummaryformodellingpricevolatility . . . . . . . . . . . . . . . . . . . . . 101
5.2 Randomparametermodels:results(withoutstocks). . . . . . . . . . . . . . . . . . . . . 102
5.3 Randomparametermodels:results(withstocks). . . . . . . . . . . . . . . . . . . . . . . 106
5.4 Panelmodelresults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
5.5 Summaryofresults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
6.1 ADFtestforunitrootsinlevelsandreturns . . . . . . . . . . . . . . . . . . . . . . . . . 118
6.2 Distributioncharacteristicsofthereturnsseries . . . . . . . . . . . . . . . . . . . . . . . 119
6.3 EstimationresultsfortheunivariatepartoftheMGARCHmodel . . . . . . . . . . . . . 120
6.4 Estimatedconditionalcorrelations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
7.1 Maizepricechanges:2005-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
7.2 Statisticalpropertiesofmaizepriceseries:1999-2009 . . . . . . . . . . . . . . . . . . . . 132
7.3 Wheatpricechanges:2005-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
7.4 Statisticalpropertiesofwheatpriceseries:2005-09. . . . . . . . . . . . . . . . . . . . . . 137
7.5 Ricepricechanges:2005-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
7.6 Statisticalpropertiesofricepriceseries:2005-09 . . . . . . . . . . . . . . . . . . . . . . . 142
7.7 EstimatedmaizeVAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
7.8 EstimatedwheatVAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
7.9 EstimatedriceVAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
8.1 Foodprices:testsfornon-stationarity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
8.2 Differencedfoodprices:descriptivestatistics . . . . . . . . . . . . . . . . . . . . . . . . . 157
8.3 Tracestatistictestsforcointegrationinfoodmarkets . . . . . . . . . . . . . . . . . . . . 158
8.4 EstimatedmultivariateGARCHmodel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
8.5 Worldwheatandmaizepriceconditionalvariances . . . . . . . . . . . . . . . . . . . . . 160
8.6 Domesticandinternationalfoodprices:vectorerrorcorrectionmodels . . . . . . . . . . 165
10.1 Selectedinternationalcerealexportprices. . . . . . . . . . . . . . . . . . . . . . . . . . . 200
10.2 Marketandtrade-basedpolicymeasuresadopted(asat1December2008) . . . . . . . . 201
10.3 Countriesthatintroducedsafetynetprogrammesinresponsetohighfoodprices. . . . 202
10.4 Short-termmeasuresaimedatsupportingproducersandproduction . . . . . . . . . . . 203
10.5 Domesticfoodgrainpricechangesforselectedcountries . . . . . . . . . . . . . . . . . . 204
11.1 Post-ICApricechanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
13.1 CME Group (CBOT) agricultural positions limits – number of contracts and metric
tonneequivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277
13.2 EuronextLIFFEagriculturalpositionslimits–numberofcontractsandmetrictonne
equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277
14.1 Tradedcommodityindices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287
14.2 Markov-switchingARmodel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289
14.3 Summarystatisticsofwheatandmaizepriceseries . . . . . . . . . . . . . . . . . . . . . 294
14.4 Parameterestimatesfromgeneralizedmodel . . . . . . . . . . . . . . . . . . . . . . . . . 295
14.5 Parameterestimatesfrommeanreversionmodel . . . . . . . . . . . . . . . . . . . . . . 297
15.1 Parameterestimatesontheseriesofdeflatedpricedata:1949-2010 . . . . . . . . . . . . 310
15.2 Predictedfeaturesofpricedistributions:1900-2010 . . . . . . . . . . . . . . . . . . . . . 311
15.3 Parameterestimatesontheseriesofde-trendeddata:1949-2010 . . . . . . . . . . . . . . 312
15.4 Predictedfeaturesofpricedistributions.De-trendeddata:1949-2010 . . . . . . . . . . . 313
15.5 Predictedincidenceofstockouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316
16.1 GARCHmodelresults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
16.2 MS-GARCHwithωswitching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336
16.3 MS-GARCHwithallcoefficientsswitching . . . . . . . . . . . . . . . . . . . . . . . . . . 337
16.4 Probitmodelresults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339
SAFEGUARDINGFOODSECURITYINVOLATILEGLOBALMARKETS vii
16.5 Averageeffectsmodelresults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339
17.1 Worldmarketpricesofcerealsandvegetableoils(2006to2008) . . . . . . . . . . . . . . 361
17.2 SimpleaveragetariffsonbasicfoodstuffsforLIFDCsin2006. . . . . . . . . . . . . . . . 362
18.1 Volatilityincommodityprices(selectedyears) . . . . . . . . . . . . . . . . . . . . . . . . 379
18.2 Changesinpriceindicesandprimaryterms-of-trade,selectedLow-IncomeCountries:
2005-2008and2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381
18.3 WorldBank-fundedprojectsundertheGlobalFoodCrisisResponseProgramme:status
asofJanuary2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387
18.4 GlobalAgricultureandFoodSecurityProgramme:statusasofJanuary2011 . . . . . . 389
18.5 AllocationofresourcesunderV-FLEXfor2009-2010 . . . . . . . . . . . . . . . . . . . . . 390
19.1 WheatimportprofilesofselectedLIFDCs . . . . . . . . . . . . . . . . . . . . . . . . . . . 409
19.2 Average unanticipated prediction errors, coefficients of variation and standard
deviations of percentage prediction errors of cash and futures prices for wheat on
CMEover1985-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415
19.3 Unanticipatednormalizedstandarddeviationsofmonthlywheatimportbillchanges
withandwithouthedgingwithfuturesandatthemoneyoptions . . . . . . . . . . . . . 417
19.4 Unanticipatednormalizedstandarddeviationsofmonthlywheatimportbillchanges
withatthemoneyoptionshedgingonly . . . . . . . . . . . . . . . . . . . . . . . . . . . 418
20.1 Factorsaffectingthepremiumofanoption . . . . . . . . . . . . . . . . . . . . . . . . . . 428
20.2 Overallprofitandlossgeneratedbyarollingsix-monthhedge:Jan2007toDec2010 . . 436
20.3 Profitandlossfromarollingsix-monthhedge:2007. . . . . . . . . . . . . . . . . . . . . 436
20.4 Profitandlossfromarollingsix-monthhedge:2008. . . . . . . . . . . . . . . . . . . . . 436
20.5 Profitandlossfromarollingsix-monthhedge:2009. . . . . . . . . . . . . . . . . . . . . 437
20.6 Profitandlossfromarollingsix-monthhedge:firstsixmonthsof2010 . . . . . . . . . . 437
20.7 Performancecharacteristicsofhedgingstrategies . . . . . . . . . . . . . . . . . . . . . . 437
21.1 Securitiesversusfutures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449
21.2 Standardshorthedgeexample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451
21.3 Standardlonghedgeexample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451
21.4 Pitfallsofhedgingexample:soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452
21.5 IMFcalculationofSDRvalue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456
22.1 Wheat:leadingproducersandtheirglobalshare . . . . . . . . . . . . . . . . . . . . . . . 462
22.2 Rice:leadingproducersandtheirglobalshare . . . . . . . . . . . . . . . . . . . . . . . . 463
22.3 Coarsegrains:leadingproducersandtheirglobalshare . . . . . . . . . . . . . . . . . . 464
22.4 Soybeans:leadingproducersandtheirglobalshare . . . . . . . . . . . . . . . . . . . . . 464
22.5 Plantingandharvestingperiodsformajorcropsinleadingagriculturalmarkets . . . . 465
24.1 Indicatorsusedinmonitoringandevaluation . . . . . . . . . . . . . . . . . . . . . . . . 505
25.1 Comparison of maize purchases from South Africa using the FPF compared with
forecastcontribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526
26.1 Objectivesofinputsubsidyprogrammes . . . . . . . . . . . . . . . . . . . . . . . . . . . 531
26.2 Evaluationindicatorsofinputsubsidyprogrammes. . . . . . . . . . . . . . . . . . . . . 540
27.1 Incrementalannualpublicinvestmentneededtoeradicatehungerby2005 . . . . . . . 545
27.2 Investmentmeasuresbyinvestmentareaandregion . . . . . . . . . . . . . . . . . . . . 548
27.3 Baseyearand2025undernourishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549
27.4 GDPandinvestmentincreasesneededtoreachzerohunger . . . . . . . . . . . . . . . . 550
27.5 Investmentinfoodsafetynets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555
27.6 Investmentinresearchanddevelopment . . . . . . . . . . . . . . . . . . . . . . . . . . . 557
27.7 Investmentinextension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559
27.8 Investmentinruralroads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561
27.9 Investmentinstorage,marketingandprocessing . . . . . . . . . . . . . . . . . . . . . . 562
27.10 Pro-poorR&Dprioritiesinplantbreeding . . . . . . . . . . . . . . . . . . . . . . . . . . 567
viii SAFEGUARDINGFOODSECURITYINVOLATILEGLOBALMARKETS
Figures
1.1 Annualrealpricesofselectedfoodstuffs:1957-2010 . . . . . . . . . . . . . . . . . . . . . 9
1.2 Annualizedrealhistoricalvolatilityofselectedfoodstuffs:1957-2010 . . . . . . . . . . . 10
1.3 Impliedvolatilities:1987-2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.4 Sharesofincomeinpooresthouseholdsspentonfoodinselecteddevelopingcountries 11
1.5 Householdcopingbehaviourandnutritionimpactsfollowingasuddenriseinfood
prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.6 StapleconcentrationandtheshareoftradedstapleinLIFDCdiets(2007data) . . . . . 14
1.7 Shareofforeignexchangereservestomeetcerealimportbills:1995-2010. . . . . . . . . 16
1.8 Theburdenofimportingfood:1995-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.9 Theburdenofimportingfood:1995-2010(continued) . . . . . . . . . . . . . . . . . . . . 18
2.1 TheimplicationsofseriespersistenceforasimpleAR(1)process . . . . . . . . . . . . . 31
2.2 Skewnessincommodityprices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.3 Excesskurtosisofannualcommodityprices . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.1 Globalaffordabilityoffood:1990-2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.2 Globalfoodtradeincalories:1970-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.3 Timelineforthe2006-08turmoil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.4 Timelineforthe1973-74crisis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.5 Priceresponsetoshocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.6 Actual(1980-2009)andprojected(2010-15)GDPgrowthinChina,IndiaandtheWorld
(constantprices) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3.7 Geographicalconcentrationintheglobalcerealmarket:1961-2010 . . . . . . . . . . . . 55
3.8 Cerealstocks-to-useinmajorexportingcountries:1980-2010 . . . . . . . . . . . . . . . . 55
3.9 Crudeoil,averagespotprice:1960-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
3.10 USmaizeproductionandethanolusage,actualandprojected . . . . . . . . . . . . . . . 57
3.11 Actualandprojectedglobalbiofueldemand . . . . . . . . . . . . . . . . . . . . . . . . . 58
3.12 Monetaryvariablesandfoodprices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.1 Populationgrowthto2050 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
4.2 Urbanpopulationgrowthto2050 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
4.3 Percapitaarablelandavailability:1961-2008 . . . . . . . . . . . . . . . . . . . . . . . . . 69
4.4 Globalgrainyields:1961-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
4.5 Wheatproduction:climatechangeimpacts . . . . . . . . . . . . . . . . . . . . . . . . . . 77
4.6 Maizeproduction:climatechangeimpacts . . . . . . . . . . . . . . . . . . . . . . . . . . 77
4.7 Riceproduction:climatechangeimpacts . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
4.8 Cerealnet-trade:climatechangeimpacts . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
4.9 Percentagechangeincerealprices(optimisticCCscenario) . . . . . . . . . . . . . . . . 81
4.10 Anidealizedfoodsystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
4.11 Afoodsystemunderdrought. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.1 RapeseedpricequotationsattheMATIF . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
6.2 VolumeofcontractstradedduringonedayattheMATIFnearest(first)andsecond-
nearestexpiration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
6.3 Returnsandsquaredreturnsofrapeseedprices . . . . . . . . . . . . . . . . . . . . . . . 115
6.4 Crudeoilpricedevelopments:1999-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
6.5 Conditionalvarianceofdifferentcommoditypricereturns . . . . . . . . . . . . . . . . . 122
6.6 Dynamicconditionalcorrelationofrapeseedpricereturnsandothercommodities . . . 123
6.7 Dynamicconditionalcorrelationofrapeseedandcrudeoil . . . . . . . . . . . . . . . . . 124
7.1 Importandexportparityprices:theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
7.2 USDollarmaizeprices:1999-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
7.3 Estimatedimpulseresponsefunctions:maize . . . . . . . . . . . . . . . . . . . . . . . . 134
7.4 USDollarwheatprices:1999-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
7.5 Estimatedimpulseresponsefunctions:wheat . . . . . . . . . . . . . . . . . . . . . . . . 139
7.6 USDollarriceprices:2005-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
7.7 Impulseresponsefunctions:rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
SAFEGUARDINGFOODSECURITYINVOLATILEGLOBALMARKETS ix
8.1 Peruvian and world wheat prices: domestic price conditional variance, world price
conditionalvarianceandconditionalcorrelation . . . . . . . . . . . . . . . . . . . . . . . 161
8.2 Mexican and world maize prices: domestic price conditional variance, world price
conditionalvarianceandconditionalcorrelation . . . . . . . . . . . . . . . . . . . . . . . 162
8.3 Indian and world rice prices: domestic price conditional variance, world price
conditionalvarianceandconditionalcorrelation . . . . . . . . . . . . . . . . . . . . . . . 162
8.4 Philippine and world rice prices: domestic price conditional variance, world price
conditionalvarianceandconditionalcorrelation . . . . . . . . . . . . . . . . . . . . . . . 162
8.5 Malawi and world maize prices: domestic price conditional variance, world price
conditionalvarianceandconditionalcorrelation . . . . . . . . . . . . . . . . . . . . . . . 163
8.6 Niger and world sorghum prices: domestic price conditional variance, world price
conditionalvarianceandconditionalcorrelation . . . . . . . . . . . . . . . . . . . . . . . 163
9.1 Monthlyinflation-adjustedriceprices:January2000toSeptember2007 . . . . . . . . . 172
9.2 Timelineofkeyeventsintheworldricemarketturbulence. . . . . . . . . . . . . . . . . 175
11.1 Wheatstock-consumptionratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216
11.2 WheatreferencepricedeflatedbyUnitedStatesPPI . . . . . . . . . . . . . . . . . . . . . 216
11.3 Maizestock-consumptionratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
11.4 MaizereferencepricedeflatedbyUnitedStatesPPI . . . . . . . . . . . . . . . . . . . . . 217
11.5 Ricestock-consumptionratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218
11.6 RicereferencepricedeflatedbyUnitedStatesPPI . . . . . . . . . . . . . . . . . . . . . . 218
11.7 Deflatedwheatpricesandstock-consumptionratio:1961/62–2009/10 . . . . . . . . . . . 219
11.8 Deflatedmaizepricesandstock-consumptionratio:1961/62–2009/10 . . . . . . . . . . . 220
11.9 Deflatedricepricesandstock-consumptionratio:1961/62–2009/10 . . . . . . . . . . . . 221
11.10 Internationalgrainsprices:2005-10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
12.1 Howstocksmoderatepriceresponsetoshocks. . . . . . . . . . . . . . . . . . . . . . . . 243
12.2 Theeffectofapriceflooronmarketdemand . . . . . . . . . . . . . . . . . . . . . . . . . 245
12.3 Priceprobabilitiesunderapricefloorandapriceband . . . . . . . . . . . . . . . . . . . 247
12.4 Probabilityofpriceinperiodt+1whencurrentpricePtis74percent,94percentor114
percentofthemeanprice,USDollar100 . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
13.1 Worldwheattradeshares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
13.2 OpeninterestintheCMEsoftredwheatcontract(August2010) . . . . . . . . . . . . . . 274
14.1 Simulatedserieswithexplosiveroot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288
14.2 MovingDFtestonwheatfuturesprices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289
14.3 Logisticfunctionshowingimpactoffundamentaltraders . . . . . . . . . . . . . . . . . 293
14.4 Pricesusedinmodellingmomentum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294
14.5 Fourrierfundamentalvalueinwheatpriceseries . . . . . . . . . . . . . . . . . . . . . . 296
15.1 Annualrealpricesofmaize,wheat,riceandsugar:1900-2010 . . . . . . . . . . . . . . . 309
15.2 Empirical joint distribution of first-order correlation & coefficient of variation as
predicted by the storage model and estimated on maize deflated prices: 1900-2010
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
15.3 Empiricaljointdistributionoffirst-ordercorrelation&skewnessaspredictedbythe
storagemodelandestimatedonmaizedeflatedprices:1900-2010 . . . . . . . . . . . . . 312
15.4 Empirical joint distribution of first order correlation and coefficient of variation as
predictedbythestoragemodelandestimatedonsugardeflatedprices:1900-2010 . . . 313
15.5 Empiricaljointdistributionoffirst-ordercorrelation&skewnessaspredictedbythe
storagemodelandestimatedonsugardeflatedprices:1900-2010 . . . . . . . . . . . . . 314
15.6 Annualde-trendedrealpriceindexesofmaize,wheat,riceandsugar:1949-2010 . . . . 315
15.7 One-stepaheadpredictionofwheatprice(asofyear2006) . . . . . . . . . . . . . . . . . 317
15.8 One-stepaheadpredictionofwheatprice(asofyear2007) . . . . . . . . . . . . . . . . . 318
16.1 Stocks-to-disappearanceforecastsandfuturesprices(USwheat) . . . . . . . . . . . . . 329
16.2 WASDEwheatstocks-to-disappearanceforecastsforUS:1970-2010 . . . . . . . . . . . . 334
16.3 WASDEwheatstocks-to-disappearanceforecastsforUSandCMEwheatfuturesprices 334
16.4 Regime-dependentnewsimpactcurve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337
16.5 High-volatilityregimeprobabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337
x SAFEGUARDINGFOODSECURITYINVOLATILEGLOBALMARKETS