The Economics of Food Price Volatility

There has been an increase in food price instability in recent years, with varied consequences for farmers, market participants, and consumers. Before policy makers can design schemes to reduce food price uncertainty or ameliorate its effects, they must first understand the factors that have contributed to recent price instability. Does it arise primarily from technological or weather-related supply shocks, or from changes in demand like those induced by the growing use of biofuel? Does financial speculation affect food price volatility?

The researchers who contributed to The Economics of Food Price Volatility address these and other questions. They examine the forces driving both recent and historical patterns in food price volatility, as well as the effects of various public policies in affecting this volatility. The chapters include studies of the links between food and energy markets, the impact of biofuel policy on the level and variability of food prices, and the effects of weather-related disruptions in supply. The findings shed light on the way price volatility affects the welfare of farmers, traders, and consumers.

Jean-Paul Chavas is the Anderson-Bascom Professor of Agricultural and Applied Economics at the University of Wisconsin?Madison and a member of the board of directors of the NBER. David Hummels is professor of economics in the Krannert School of Management at Purdue University and a research associate of the NBER. Brian Wright is professor in and chair of the Department of Agricultural and Resource Economics at the University of California, Berkeley.