The nature and interaction of the causes that led to the world food crisis of 2006/07

This thesis provides a survey of the nature and interaction of the causes that led to the spike in world food prices in 2006/07. An existing theoretical framework of commodity price dynamics forms the context of the analysis. Within this context the theoretical strengths and weaknesses of the causes of the world food crisis are assessed. Subsequently, theoretically valid causes are submitted to multiple regression analysis and partial correlation analysis in order to determine the relative importance of these causes. I show that the food price spike could only take place as a result of a combination of long-run and short-run factors. Fundamental pressure on world food prices was exerted by a decades-long slowdown of agricultural productivity and increased demand for biofuels. The short-run determinants that unleashed and amplified that price pressure were mainly weather shocks and export restrictions. Speculation was not a cause of the crisis but it did exacerbate the crisis. The level of global food stocks played an indirect role by dampening price signals in the 1990s and then magnifying price signals in the 2000s. Finally, based on the projection that world food prices will remain high in the next decade, I propose some policy recommendations.