Quantifying the causes of the global food commodity price crisis.

Policy Summary

This paper shows that if inventory effects are not taken into account, the impacts of the various factors on food commodity price inflation would be overestimated. From a policy standpoint, the food crisis emphasizes the importance of both a proactive inventory-management policy and the need for mechanisms that either compensate the poor when prices rise to abnormally high levels or simply mitigate the spike in price. Such mechanisms may include automatic adjustment of biofuel mandates to situations in food markets, and setting up international institutions that allow poor countries the option of acquiring food at predetermined prices. The paper suggests that introducing regulation that would allow more effective utilization of existing technologies is one of several strategies that can reduce the likelihood of a food price spike.

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