2012 Reports

Speculation, Embedding, and Food Prices: A Cointegration Analysis

Windawi, A. Jason

The disparity between massive volatility in food prices and relatively slow changes in agricultural supply and demand since the beginning of the food crisis in 2007 has focused attention on the potential effects of financial speculators in food markets. The challenge of identifying the effects of such speculators has been complicated by a number of factors, key among which has been the criteria used to define speculative activity. This paper provides a more targeted analysis of one particular kind of speculator, and builds on a combination of sociological and econometric analysis to identify their presence in commodity markets during the food crisis.