The recent ups, downs, and back ups of the agricultural commodity markets has everyone trying to figure out what is behind the wide price swings of the past four years. The October 2006 close on the Chicago Board of Trade nearby futures was $2.32 per bushel. By July 2008, just 20 months later, the close was $7.24, a 212 percent increase. Eight months later, the February 2008 close was $3.5075, a drop of 52 percent. Corn prices then began to turn around reaching an October 2010 close of 5.82, 150 percent above the price four years earlier. Soybeans, wheat and rice have followed similar, but more muted paths.

Potential, oft-mentioned causes for this market behavior have included: the increased use of corn to produce ethanol, a growing middle class in China and India demanding a diet that includes more meat, increases in the price of crude oil, the growing impact of index funds in the futures market, low interest rates, changes in the exchange rate of the U.S. dollar, market intervention by various countries in response to food riots, a declining rate of growth in grain production, and a reduction in the stock levels of various grains. That is quite a list. Do all these “causes” belong on the list?  Which ones are of most importance?

An IFPRI (International Food Policy Research Institute) Research Monograph, Re­flections on the Global Food Crisis: How did it happen? How has it hurt? And how can we prevent the next one?, by Derek Headey and Shenggen Fan and released in November 2010, wades into these issues,

The study was “finalized in early 2010” and does not reflect the recent upward movement of agricultural commodity prices. One of the overriding concerns of the study is the impact of sharp changes in agricultural prices on impoverished people.

As the authors write: “Many impoverished people depend on food production for their livelihoods, and all poor people spend large portions of their household budgets on food. Sharply rising prices offer few means of substitution and adjustment, especially for the urban poor, so there are justifiable concerns that millions of people may be plunged into poverty by this crisis, and that those who are already poor may suffer further through increased hunger and malnutrition.”