Disturbances in the Grain Markets: What is really the cause?

This paper investigates the disturbances in the grain markets in the year 2008. We study the possible determinants behind the grain price increases. The influence of demand factors like biofuel demand and the size of grain stocks are very small. We can draw the same conclusion for the supply factors; agricultural policy, grain production and the oil price. Since the reason for the disturbances is not in the market fundamentals, we investigate the speculation factor. We suspect that the disturbances in the grain markets were part of a commodity boom. The developments in demand and supply factors during the crisis time could have fed the panic that led to speculation in the commodity markets. We have not found any solid empirical evidence for speculation in this paper. This is a task for future research.