What are the risks of food price changes? A time series analysis.

Ø Hoveid, (submitter)


It is a widely held belief (IPCC) that climate change brings more risks to the world. With regard to food production, market prices might be expected to be more volatile. So far, the evidence of this is meager. With novel methods I show that the price volatility of wheat indeed has increased the last sixty five years. It cannot be proved, however, that the additional volatility is due to climate change. Alternatively, the cause might be market regime changes that arose with the oil embargo of 1973-74. Sixty five years of observations seems far too short to assess the long term relationship between climate and food price volatilities. Regardless of cause, commodity price changes has skewed distributions with higher probability for a certain price increase than for an equally sized decrease. This implies that the incentives for storage is stronger for users than for suppliers.

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