Food prices and market volatility - The variables involved

The new phase of rapid food prices increases received global attention due to their social and economic consequences. We recommend a model to interpret the status of commodity prices.

Beginning the second half of 2010, the market prices of raw agricultural materials increased very rapidly: during the period between July 2010 and February 2011, the FAO Food Price Index increased by 38%, reaching a peak greater than that recorded during the food crisis of 2008. In 12 months, from June 2010 to June 2011, the price of cereal alone grew by 71%. The World Bank has estimated that these jumps in prices caused another 44 million people to fall under the poverty threshold.

In addition, a disturbing increase in prices has been noticed that has generated uncertainty and instability in the markets. The volatility of the agricultural markets, in effect, represents in many ways a new phenomenon and the current situation will remain the same for some time, placing the entire agricultural system under pressure if no effective solutions are found and shared.

 It is not an exclusively economic problem or a worry that is relative only to the parties involved in the agri-food industry; in fact, this instability has dramatic consequences, particularly for the inhabitants of the poorest countries in the world.

What are the reasons for this discontinuity? What has changed relative to the recent past?

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