Food and global capital

Rather than working on my conference paper, I spent yesterday updating some of my earlier data on food prices and investment for my presentation. It’s not quite there yet, but I think I might have found some interesting bits.

First, I updated my prior comparison of the timing of increases in food commodity prices and index-invested assets (as a proxy for institutional investment in agricultural commodities). Like the rest of the charts, the data aren’t directly comparable given that the index does not begin at100%, so I shifted its axis to the right side. The important point is the timing and direction of the changes, which track closely. They also show that index investment climbed steeply in advance of the current iteration of the crisis. That indicates to me that index investment has been a factor (though far from the only one).

An expanded view of just the crisis years shows the timing a bit more clearly (though it may be hard to read in this remedial looking jpeg – I am having trouble with pasting graphs from Excel).

There has been a lot of attention recently to farmland investment by pension funds, so I thought I would try including that. There aren’t any central data sources, so I used data from the KC Fed on farmland values in their district (most of the Central states, though Iowa and some others are not included). The data here are even more heterogeneous, as the farmland are presented in terms of YOY percentage change in value, on a quarterly basis, while the Food Index is the aggregated commodity index of all food futures on UNCTADStat.

That last chart tells the story best, I think. The index investment numbers are a direct measure of global capital flows, and the correlation between those flows and food and land prices demonstrates that investment is having an impact on people’s ability to eat.

UPDATE 5/19/11: That last bit was sloppy – “having an impact” is both weak writing and potentially wrong in implying strong causal statement that I’m not yet able to demonstrate. I’m reading a paper by Peter Timmer that I think does, but I will have a summary of that later when I’m finished reading it.

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