A Note On Rising Food Prices

Mitchell, Donald

doi:10.1596/1813-9450-4682

Cited by 714 publications

(463 citation statements)

References 2 publications

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“…Mitchell (2008) argues that biofuel production from grains and oilseeds account for two-third of the price increase in these commodities. FAO (2008) find grain prices to be 12% lower while wheat and vegetable prices to be 7% and 15% lower if biofuel production remained at 2007 level compared to if production doubled by 2018.…”

Section: Introductionmentioning

confidence: 99%

Drivers and impact of food inflation in India

Bhattacharya

Gupta²

2017

Macroeconomics and Finance in Emerging Market Economies

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Section: Introductionmentioning

confidence: 99%

Drivers and impact of food inflation in India

Bhattacharya

Gupta²

2017

Macroeconomics and Finance in Emerging Market Economies

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“…Other studies assert that ethanol policy strongly affected the level (Mitchell 2008;Hochman, Rajagopal, and Zilberman 2010) and the volatility (Wright 2011) of corn prices. But each of these papers is mainly qualitative; none provides rigorous empirical estimates to support its conclusions.…”

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confidence: 99%

Commodity Storage and the Market Effects of Biofuel Policies

Carter

Rausser

Smith

2016

American J Agri Economics

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US legislation passed in 2007 (RFS2) increased by about 1.3 billion bushels the net amount of corn required to be processed annually into ethanol for motor-fuel use. Using modern time-series methods, we estimate that corn prices were about 30 percent higher between 2006 and 2014 than they would have been but for RFS2 and if pre-2006 trends had continued. We estimate a permanent corn demand increase of 1.3 billion bushels increased the long-run price by 31% (90% confidence interval is [5%,95%]). Our identification strategy is unique in the literature because it enables estimation of the effects of transitory shocks, such as weather, separately from the effects of persistent shocks, such as the ethanol mandate. Keywords:Ethanol; agriculture; energy policy; VAR; partial identification The difference between the RFS2 and RFS mandates is approximately 5.5 billion gallons (bgal) of ethanol annually in the years 2010-2012, which corresponds to about 1.3 billion bushels of corn after accounting for feed by-products. We take these 1.3 billion bushels as the permanent increase in corn demand in the RFS2, and we estimate that it caused a 31 percent long-run increase in corn prices.Interpreting our estimates correctly requires a precise statement about counterfactual ethanol production. In our counterfactual, ethanol production would have increased from its actual 2005 value of 3.9bgal to 8.8bgal in 2014. This path represents a continuation of the trend observed between 2002 and 2005 and is slightly below the path predicted by the USDA in early 2006. We argue it is a reasonable counterfactual path in the absence of the RFS2. We also point that our long-run estimate is scalable. To estimate the effect of increasing corn demand permanently by any multiple of 1.3 billion bushels, a reader could multiply our estimate by that multiple.Previous studies have also found that the increase in corn-ethanol production affected corn We focus our analysis on commodity inventory dynamics, which distinguishes our work from the extant literature. This approach enables us to estimate the price effects of persistent shocks to supply or demand separately from the effects of transitory shocks in a market for a storable commodity. This distinction is important in our context because persistent shocks have larger price effects than transitory shocks. The market can respond to a transitory shock, such as poor growing season weather, by drawing down inventory. This action mitigates the price effect. A persistent shock, such as an increase in current and expected future demand, cannot be mitigated by drawing down inventory.To identify these two types of shocks, we exploit their differential effects on inventory levels and on the term structure of futures prices. For example, all else equal, a sudden increase in this year's consumption demand reduces available inventories and raises spot prices relative to futures prices. This is a transitory shock. In contrast, a predicted increase in next year's consumption demand generates an increase in i...

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“…Especially the impact of bio fuel demand on the drastic increase in food prices between 2003 and 2008 is subject to a heated debate (e.g. Mitchell, 2008;Headey and Fan, 2008). For actual decision making, it is important to answer the questions of price effects, increased land use or the efficiency of policy instruments in a quantitative manner.…”

Section: Linking Life Cycle Assessment To Partial Equilibrium Modelsmentioning

confidence: 99%

Industrial Ecology in Policy Making: What is Achievable and What is Not?

Pothen

2010

SSRN Journal

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A Note On Rising Food Prices

Cited by 714 publications

References 2 publications

Drivers and impact of food inflation in India

Drivers and impact of food inflation in India

Commodity Storage and the Market Effects of Biofuel Policies

Industrial Ecology in Policy Making: What is Achievable and What is Not?

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