Warning: Blatant self-promotion ahead.
An excerpt from an article in Foreign Affairs by Chris Barrett and I on the current food crisis:
“If demand outstrips production, food prices rise and sellers begin tapping their food inventories. Inventory management stabilizes prices by supplementing supply in times of scarcity and boosting demand in times of surplus. But if food inventories are excessively drawn down during periods of unusually high prices, carryover stocks will be insufficient to stabilize prices during further supply or demand. This can lead to price spikes.
But high food price levels and high food price volatility are not the same things. Food price levels are at historic highs, but food price volatility, although high these past few years, is not out of line with historical experience and is generally lower than it was in the 1970s. This means that the world does not necessarily face a price volatility problem. It faces a high food price problem.”