NECSI logo

UPDATE July 2012 — The Food Crises: The US Drought

www.necsi.edu
New England Complex Systems Institute
238 Main Street Suite 319, Cambridge, MA 02142
Phone: 617-547-4100 Fax: 617-661-7711

Download PDF (also on arXiv)

Drought triggered food price model predictions
CNN The Global Impact of Drought in the U.S.
by Isobel Coleman
Sympatico TV: Canada's Sympatico
Video Interview: Yaneer Bar-Yam
Monitor DE TV: Germany's Monitor
Video Interview: Yaneer Bar-Yam
RT TV: Russia Today's Keiser Report
Video Interview: Max Keiser and Yaneer Bar-Yam
The Phil Valentine Show NECSI President interviewed on Phil Valentine Show
by Phil Valentine
Wired U.S. Drought Could Cause Global Unrest
by Brandon Keim
Time When the Rains Stop
by Bryan Walsh
The Washington Post Wonkblog: The U.S. drought is mostly a problem for poorer countries
by Brad Plumer
The Washington Post Amid a devastating drought, does it still make sense to use corn for fuel?
by Brad Plumer
The Washington Post Wonkblog: The Senate’s unusual vote on the Bush tax cuts
by Ezra Klein
The Washington Times Burning corn in a famine: The obscenity of the corn ethanol mandate
by George Weir
Smithsonian As Global Food Prices Climb, So Does the Probability of Riots
Forbes The Coming Food Crisis: Blame Ethanol?
by William Pentland
Al Jazeera Food riots predicted over US crop failure
by Robert Kennedy
The Guardian We are teetering on the brink of another global food crisis
by Amy Horton
The Guardian US farmers urge Obama administration to suspend ethanol quota amid drought
by Suzanne Goldenberg
Le Monde Aux Etats-Unis, l'utilisation de maïs pour l'éthanol fait polémiqu
by Hervé Kempf
The Atlantic America's Drought is the World's Problem
by Isobel Coleman
The Atlantic U.S. Drought Could Cause Global Unrest
by Brandom Keim
The Sunday Times Blighted crops to spark food riots [.doc]
by Danny Fortson
Christian Science Monitor US drought already rippling out into the world
by Dan Murphy
Oxfam Food crises doomed to repeat until leaders find courage to fix problems
Council on Foreign Relations The Global Impact of Drought in the U.S.
by Isobel Coleman
thestar Food crisis is a poverty crisis
by David Olive
The Takeaway US Ethanol Requirements Could Cause A Global Food Crisis
Vice Global Food Riots Nigh, Says Science
by Brian Merchant
Motherboard We Are Now One Year Away From Global Riots, Complex Systems Theorists Say
by Brian Merchant
AgWeb EPA Succumbs to Pressure to Reduce Ethanol Mandate
by Boyce Thompson
Emerging Markets Stop ethanol production now, expert warns
by Phil Thornton
Vice 28 Questions Mainstream Media Should Really Be Asking?
by Michael Snyder
Kurzweil We are now one year away from global riots, complex systems theorists say
Slashdot Complex Systems Theorists Predict We're About One Year From Global Food Riots
Reddit Reddit thread #1: We Are Now One Year Away From Global Riots, Complex Systems Theorists Say
Reddit Reddit thread #2: We are now one year away from global riots, complex systems theorists say
rt US drought might lead to food shortages and global unrest
Daily Kos The GOS Weekly Review: The Times They Are-A-Climate Changing
by Asinus Asinum Fricat
The Register-Guard EDITORIAL: Too much corn in the tank
Giornalettismo Negli Usa è guerra tra mucche e benzinai
by Editorial Staff
Green Report Gli allevatori Usa chiedono all'Epa una moratoria sulle quote di etanolo da mais
Biofuels Digest NECSI report warns that drought and ethanol mandates may drive food prices to record highs
by Isabel Lane
EcoWatch Severe Drought Shows Stupidity of Corn Ethanol Mandate
Green Chip Stocks Corn Ethanol Drought Connection
by Michael Rosenoer
Farm Gate A Dangerous Way To Test A Theory
by E.B. Klassen
Capital of Nasty "Global food prices are spiking upwards because of widespread drought in the U.S., the breadbasket of the world."
Contrarian Insights Drought Update: Social unrest, War, and…Massive Profits Ahead?
by Andrew Mickey
Personal Liberty Digest Rising Food Prices, Social Unrest In Coming Months
by Sam Rolley
The Daily Impact From American Drought to "Global Catastrophe"
Ending Hunger Drought and biofuels: perfect storm for world hunger?
El Pais ¿Una crisis mundial de alimentos a la vuelta de la esquina?
by Vernor Troyo Arguedas
Ekklesia Give us today our daily bread
by Bernadette Meaden
Random Policy Food Prices and Political Crises
by Michael Cain
Inhabitat Scientists Predict That Food Riots Will Grip The Planet Within A Year
by Timon Singh
Countercurrents One Year Away From Global Food Riots, Complex Systems Theorists Say
Lenta.ru Scientists have predicted unrest because of rising prices for corn
Awramba Times Ethiopia: An Early Warning for a Famine in 2013
by Prof. Alemayehu Gebrarium
Mother Jones Yahoo! News Digg Infoshop Infoshop Pittsburgh Post-Gazette Energy Korea grist Climate Desk Democratic Underground Earth First California Gas Prices Riverside Gas Prices

Cite as: M. Lagi, Yavni Bar-Yam, Yaneer Bar-Yam, UPDATE July 2012 — The Food Crises: The US Drought. arXiv: 1209.6376 July 23, 2012.

Abstract

Recent droughts in the midwestern United States threaten to cause global catastrophe driven by a speculator amplified food price bubble. Here we show the effect of speculators on food prices using a validated quantitative model that accurately describes historical food prices. During the last six years, high and fluctuating food prices have lead to widespread hunger and social unrest. While the spring of 2012 had a relative dip in the food prices, a massive drought in the American midwest in June and July threatens to trigger another crisis. In a previous paper, we constructed a model that quantitatively agreed with food prices and demonstrated that, while the behavior could not be explained by supply and demand economics, it could be parsimoniously and accurately described by a model which included both the conversion of corn into ethanol and speculator trend following. An update to the original paper in February 2012 demonstrated that the model previously published was predictive of the ongoing price dynamics, and anticipated a new food crisis by the end of 2012 if adequate policy actions were not implemented. Here we provide a second update, evaluating the effects of the current drought on global food prices. We find that the drought may trigger the expected third food price bubble to occur sooner, before new limits to speculation are scheduled to take effect. Reducing the amount of corn that is being converted to ethanol may address the immediate crisis. Longer term, market stabilization requires limiting financial speculation.

NECSI Warns Food Prices Will Soar Because of Drought, Speculators

CAMBRIDGE (July 23) — The worst drought in the American Midwest and the highest temperatures in a half-century are poised to trigger an imminent global food crisis, scientists at the New England Complex Systems Institute said Monday. NECSI has warned for months that misguided food-to-ethanol conversion programs and rampant commodity speculation have created a food price bubble, leading to an inevitable spike in prices by 2013. Now it appears the "crop shock" will arrive even sooner due to drought, unless measures to curb ethanol production and rein in speculators are adopted immediately.

Applying their validated quantitative model for historical food prices, NECSI researchers Marco Lagi, Yavni Bar-Yam and Yaneer Bar-Yam have discovered disturbing new signs of vulnerability in global food supply, reversing 2012's relative decline in prices. "This summer, the American breadbasket has suffered debilitating droughts and high temperatures, leading to soaring corn and wheat prices in anticipation of a poor harvest," said NECSI president Bar-Yam. "We are on the verge of another crisis, the third in five years, and likely to be the worst yet, capable of causing new food riots and turmoil on a par with the Arab Spring."

Particularly worrisome, the authors said, is that speculation during the drought may trigger a feedback loop causing a massive price shock to occur earlier than expected — beginning immediately — and thus sooner than could be prevented by new regulations. This spike may raise prices well beyond the increase justified by the drought.

"The immediate impact of the drought should be addressed by reducing the U.S. government's mandate for corn conversion to ethanol," says Bar-Yam "Given the possibility of price-driven famines, burning corn for cars is unconscionable."

"The Food Crises: The US Drought" released today is a new and disturbing update, this time evaluating the impact of the summer 2012 drought on global food prices. Beyond remedial moves to reduce the amount of corn converted to ethanol, Bar-Yam said a key concern among policy makers should be curbing financial speculators. "Without increased regulation, they stand in the way of any real market stabilization."

Press contacts

Karla Bertrand, Press Relations
karla@necsi.edu, 617-547-4100

Clare Froggatt, Program Coordinator
clare@necsi.edu, 617-547-4100