Tracing the links between energy and food prices

Last month, the Institute for Agriculture and Trade Policy  (IATP) and the Global Development and Environment Institute (GDAE) (Tufts University), issued a report called “Resolving the Food Crisis: Assessing Global Policy Reforms Since 2007” authored by Timothy A. Wise and Sophia Murphy (get a copy here).

In this report, they note:

A paradigm shift is underway, cause by the deepening integration of agriculture, energy and financial markets in a resource-constrained world made more vulnerable by climate change (Wise and Murphy 2012: 9).

Indeed, since the food price crisis of 2007-8, the growing interdependence of these markets has become a topic of concern and focus, as illustrated for example, by increased high- level interest in food price volatility, biofuel policy, and investment in agriculture and land.

I have developed a visual representation of the paradigm shift described by Wise and Murphy (Figure 1) and also charted the relationship between food and energy prices, using IMF data (below). The relationship between the two is not shocking but is interesting, non-the-less.

Commodity Food Price and Fuel (energy) Index (Monthly Price January 2007-January 2012)

Source: IMF Commodity Indices
Commodity Fuel (energy) Index, 2005 = 100, includes Crude oil (petroleum), Natural Gas, and Coal Price Indices.
Commodity Food Price Index, 2005 = 100, includes Cereal, Vegetable Oils, Meat, Seafood, Sugar, Bananas, and Oranges Price Indices

One thought on “Tracing the links between energy and food prices

  1. Like you say not terribly surprising. Especially given the amount of energy inputs that contemporary agrugultural systems require (machinery, fertilizer & pesticides, etc). I’m curious what the link with the financial markets would look like. I have a suspicion, but it would be interesting to see some evidence. Part of what I’m thinking is a Planet Money podcast I listened to about the Rice shortage that wasn’t. Basically it was a crisis that was cause by mere speculation and assumed scarcity that wasn’t actually the case which does make this influence of financial speculation on food products somewhat problematic.

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